Despite a slowdown in net inflows last year, interest in exchange traded funds remains strong, according to Trackinsight’s 4th Global ETF Survey 2023. Per the survey, net inflows into ETFs reached $782 billion in 2022. While that’s down from $1.2 trillion in 2021, investor interest in ETFs remains high.
That’s especially true for equity and fixed income-related strategies. Most respondents (56%) plan to increase their exposure to equity ETFs. Meanwhile, 40% expect to up their allocation to fixed income ETFs in the next 2 to 3 years.
Trackinsight conducted the survey in partnership with J.P. Morgan Asset Management and State Street. The report details the survey’s key findings and ETF trends from more than 500 professional investors who manage nearly $900 billion of assets through ETFs.
Bryon Lake, global head of ETF solutions at J.P. Morgan Asset Management, told VettaFi that the survey reveals that ETFs are gaining in market share.
“ETFs have been growing rapidly for the last three decades. Acceleration and adoption has been pretty darn consistent over the long haul,” Lake said. “There’s never been a rolling five-year period where ETF assets haven’t doubled. We can expect similar growth rates to continue over the next five years.”
“We think that initial investors are starting to use ETFs, but overall adoption is still low,” he added.
Getting Active with ETFs
Active strategies are a driver of further ETF adoption. Respondents had between 6% and 40% of their portfolios invested in actively managed ETFs, which is higher than ever. Plus, nearly 80% of respondents in the Americas said they’d be more inclined to invest in an active strategy if it was packaged as an ETF rather than a mutual fund.
One reason why active ETFs are gaining momentum is simply because they exist. “Up until two or three years ago there weren’t much offerings in active ETFs,” Lake said. Now, with active ETFs as a viable option, investors are taking it to seek alpha and risk management.
The ETF sector has seen a Compound Annual Growth Rate of 20% to 22% over the last 10 years—and JPMAM expects that to continue. But active ETF is expected to see a CAGR north of 30%, maybe even 35%, according to Lake.
Fixed income, particularly active fixed income, is also driving interest in ETFs.
“Because of the rate increases that the Fed has undergone, bonds are now providing a very competitive option versus equities,” Lake said, noting that the actively managed (JPST ) was “yielding north of 5%.
The full survey can be found online.
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