Sixty-one percent of investors surveyed plan to boost their allocations to exchange-traded funds over the next 12 months, and while that's down 23 percentage points from last year, ETF allocations "remain strong," Brown Brothers Harriman's 10th annual global ETF investor survey released Monday said.
While the 61% of investors who said they planned to increase allocations was less than the 84% who said they planned to do so last year, this year's figure still indicates "a significant amount of new assets flowing into ETFs," Shawn McNinch, a managing director and global head of ETFs at Brown Brothers Harriman, said in comments emailed to Pensions & Investments.
"I think this could be attributed to the maturation of the ETF market," Mr. McNinch said regarding the decline versus last year. "Investors already have a certain percentage of their portfolios in ETFs."
Fifty-five percent of investors surveyed have more than 25% of their portfolios invested in ETFs, BBH's 2023 Global ETF Investor Survey showed.
The survey captured responses from 325 ETF institutional investors, financial advisers and fund managers from the U.S., Europe and Greater China. Forty percent of respondents managed more than $1 billion in assets, the survey said. Survey data was gathered in January.
Among the survey's findings was that 69% of investors plan to maintain or increase allocations to commodity ETFs. That's not surprising given that seven of the 10 best performing ETFs in 2022 were commodity products, the survey said.
The survey also found that 82% of investors plan to increase or maintain their exposures to active ETFs this year as conversions from mutual funds into actively managed ETFs intensify. The survey revealed that 92% of investors had purchased an active ETF in the last 12 months, with 46% allocating from index mutual funds and 42% allocating from active mutual funds.
Investors want more environmental, social and governance ETFs, with 50% of respondents indicating that they plan to add ESG exposures this year, the survey said. Sixty-two percent of investors in Greater China plan to boost their allocations to ESG, compared with 45% in the U.S. and 44% in Europe, the survey found.
"I do think there are questions in the U.S. on the definitions of ESG and skepticism (regarding) how different asset managers are applying different methodologies to their ESG ETFs because there are no set standards," Mr. McNinch said. "In addition, you have some large institutions who are reducing their positions in ESG products because of concerns around greenwashing and sub-optimal performance."
Global ETF assets grew from about $2.3 trillion in 2013 to nearly $9 trillion in 2022, and BBH expects that they could top $30 trillion by 2033, according to the survey.
"The rate of growth for ETFs does not surprise me," Mr. McNinch said. "ETFs offer some superior structural benefits versus a mutual fund, including tax efficiency, lower costs, and intra-day liquidity."