ETF analytics platform Trackinsight has surveyed 549 industry professionals located in the Americas (42%), Europe, the Middle East, Africa (51%), and Asia Pacific (7%) to find out how they are making investment decisions in an economic environment marked by inflation and uncertainty.
“This report offers an in-depth analysis of the ETF market, and the survey’s findings will provide investors with valuable insights into the industry’s trends and outlook,” said Philippe Malaise, CEO and founder of Trackinsight.
The survey, which offers a global view of ETF trends, polled asset managers, independent financial advisors, representatives of single-family offices, investment consultants and professionals associated with private banks, pension funds, endowments, platforms and robo-advisors, and defined contribution funds.
“An active ETF revolution is underway, with nearly 70% of global ETF buyers predominantly using active ETFs for equity, fixed income and thematic exposures. It’s critical that we understand the drivers of value and investor perspectives as we move forward on this journey,” said Travis Spence, head of EMEA ETF distribution at JP Morgan Asset Management.
Here are some takeaways from the report.
Net inflows fall to $782bn in 2022
Net inflows for ETFs--products that are traded on stock exchanges--slowed in 2022, falling from $1.2trn in 2021 to $782bn in 2022. That being said, 56% of survey respondents said they planned to boost their exposure to equity ETFs, up from 40% in 2022. 40% of respondents said they plan to increase their exposure to income ETFs.
72% of respondents said that they use ETFs for strategic asset allocation, up from 65% in 2022, and the most common usage of ETFs in a portfolio.
Though actively managed ETFs are gaining in popularity, a limited range of products, the higher cost compared to passive investments and a lack of a track record pose “obstacles” to growth, found the report. European respondents see non-transparency as more of a challenge than respondents in other regions.
Diversification benefits make thematic ETFs popular
Trackinsight’s survey highlighted a significant interest amongst investors in thematic investing, which is seen as a way to participate in technology needed for the green transition. 40% of respondents expected to increase their allocation in the coming years, found the survey.
Diversification is the most-cited reason for investing in thematic ETFs, with 60% of survey respondents naming it as their primary motivation. 56% of respondents said they use thematic ETFs to execute long-term strategic bets, which was the most cited reason in 2022 (55%) and in 2021 (66%).
Interest in technological innovation and environment
So what themes are capturing investors’ attention? 92% of survey respondents said they had invested in (68%) or were interested in (24%) thematic ETFs that address disruptive technological innovations.
81% of investors are invested (38%) or interested (43%) in environmental changes.
Respondents in Europe are even more invested or interested in ETFS related to environmental changes, found the report, reflecting the European Union’s increased awareness of the topic. As of early 2023, there are 437 thematic ETFs in environmental changes available for investment in the EU, compared to 312 in the Americas.
Why invest in ESG or sustainable ETFs?
For 59% of respondents in Trackinsight’s 2023 survey, the primary motivation for investing in ESG / sustainable ETFs was societal good and convictions. This is down from 73% in 2022 and from 84% in 2021.
The next most important reasons for investing in ESG or sustainable ETFs were avoiding long-term risks (35%) and performance (cited by 30% of respondents).
Challenges of investing in ESG or sustainable ETFs
Despite the interest in investing in ESG/sustainable ETFs, challenges such as transparency and data consistency remain, noted the survey. 62% of respondents said that the lack of consistency across ESG analysis was the biggest challenge that they faced when investing in ESG ETFs.
Trackinsight’s report states that investors have cited a lack of consistency across ESG analysis “less frequently” since 2021. The “gradual improvement” may be due to new requirements in the EU’s Sustainable Finance Disclosure Regulation (SFDR), as ESG characteristics of financial products must now be assessed and disclosed. However, there is still a lack of clarity around the article 6, 8 and 9 designations, as illustrated by the recent downgrading of funds from article 9 to article 8.
ESG strategy and research quality most important criteria
24% of investors consider ESG strategy to be an extremely important criterion when choosing an ESG ETF, followed by the index provider’s research quality (cited by 20% of respondents).
Find the full Global ETF Survey 2023 published by Trackinsight here.