Active ETF strategies are in the driver’s seat

The latest ETF survey from Brown Brothers Harriman reveals significant growth and evolving trends in the ETF market, with active strategies and thematic allocations taking center stage.

The BBH 2024 Global ETF Investor Survey, now in its eleventh edition, drew responses from 325 ETF investors, encompassing institutional investors, financial advisors, and fund managers across the US, Europe (including the UK), and Greater China. Notably, 40 percent of these respondents manage assets exceeding $1 billion.

According to the new global ETF survey, a substantial 82 percent of respondents, led by 97 percent of those from the US, predict they will increase their use of ETFs in the coming year.

Across all investors polled, 78 percent said they plan to boost their exposure to actively managed ETFs. An 80 percent majority of respondents have purchased an active ETF in the past 12 months, and 42 percent expect to dial up their exposures by more than 25 percent within the next year.

Once a dominant force driving fund flows, index mutual funds are continuing to lose ground, with 48 percent of respondents saying they’re a top source of capital in reallocating to active ETFs.

The survey also sheds light on targeted allocations, with 70 percent of respondents predicting an increased exposure to fixed income ETFs over the next year. Three-quarters of respondents plan to increase their investments in thematic ETFs (73 percent) or ESG ETFs (74 percent). Among those pursuing thematic strategies, 36 percent are looking at exposures to cryptocurrency and digital assets.

A significant 43 percent of survey respondents said they want to see more product choices in the active fixed income ETF space. Signaling more robust demand for diversification, another 42 percent called for more liquid alternative ETFs.

When asked about their interest in specific ETF strategies, respondents from the US indicated a diverse range of preferences. Defined outcome ETFs attracted 28 percent interest, while cryptocurrency and leveraged/inverse ETFs were favored by 23 percent and 27 percent of respondents, respectively.

Actively managed ETFs also saw significant interest at 28 percent, alongside fixed income ETFs, which matched this figure. Commodity ETFs led the US interest at 31 percent, indicating a robust demand for diverse investment options.

Factors such as value, growth, and momentum were of interest to 21 percent of US respondents, while ESG strategies appealed to 23 percent. Target date ETFs and dividend/income ETFs garnered 20 percent and 19 percent interest, respectively, with thematic ETFs attracting 17 percent.