Brown Brothers Harriman’s ninth annual global ETF investor survey finds 84% of global ETF investors plan to increase asset allocation to ETFs, signaling growth will accelerate in 2022
Brown Brothers Harriman & Co. (BBH), a market leading ETF custodian and administrator, today released the findings of its ninth annual global ETF investor survey, identifying key trends and investor sentiment in the ETF market. The report captures responses from nearly 400 institutional investors, fund managers and financial advisors from the United States, Europe, and Greater China. In total, 39% of respondents had more than $1 billion AUM, up from 30% in 2021.
The findings underscore ETFs as a foundational tool in portfolio construction and paint a bullish outlook by investors for the ETF market overall in the year ahead.
- Active strategies are in demand and global interest is gaining pace: Active strategies represented about 10% of net inflows in 2021. Among global respondents, 78% plan to increase their exposure to active ETFs this year (up from 65% in 2021). Demand for defined outcome ETF product development is growing, with the U.S. and Greater China leading the way.
- Thematic ETFs set to increase portfolio share: 85% of global ETF investors plan to increase exposure to thematic ETFs. Over the next five years, 38% of respondents plan to allocate 11-20% of their portfolio to thematic ETFs, led by U.S. and Greater China respondents.
- Large jump in fixed income ETF interest from U.S. investors year-over-year: Nearly all U.S. investors (86%) plan to increase fixed income ETF allocations over the next 12 months, jumping significantly from 67% in 2021.
- ESG tailwinds: Despite citing lack of consistent methodology as a headwind to ESG adoption, 89% of investors plan to add ESG investments to their portfolios, including 56% who will access ESG exposure through thematic ETFs.
- Digital assets and cryptocurrency-themed ETFs on the rise: Reflecting the growing interest in digital assets, 54% of investors plan to add digital asset and cryptocurrency thematic strategies to their portfolio in 2022. Technology-focused thematic ETFs, including cloud computing and cybersecurity products, were the most popular option among investors at 64%.
- Investors looking for ETF models: Approximately one third of respondents use model portfolios provided by ETF issuers, and another 20% rely on model portfolios from third-party providers.
“2021 was a year of record growth, and 2022 looks set to follow suit as investors demonstrate their confidence in ETFs and increase their allocation across multiple strategies,” said Shawn McNinch, Global Head of ETF Services at BBH. “With allocations rising across active, thematic and ESG strategies globally, it’s evident that the depth of choice in the market continues to provide new portfolio opportunities for investors of all types.”
The survey revealed some significant year-over-year increases: Overall, 84% of global investors plan to increase allocations to ETFs in the next year. When we asked about specific strategies and sectors, we saw that investors plan to increase holdings in thematic, active and fixed income ETFs in particular, suggesting another strong year of growth for the market may be in store.
ETFs broke $10 trillion in assets under management (AUM) and collected $1.2 trillion in flows, through year-end 2021, according to ETFGI. Much of that was driven by U.S. investors, who invested $3 into ETFs for every $1 in mutual funds, closing the gap between usage of the two structures.
“While the mutual fund market asset base is still considerably larger than ETFs, the difference narrows each year and likely will continue to do so, especially as ETF flows remain strong, mutual fund to ETF conversions gain momentum and global retail markets grow,” said McNinch.