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TrackInsight’s Global ETF Survey shows how investors are embracing thematic funds


TrackInsight’s annual global survey of professional investors active in the ETF space has shown just how far ETFs – exchange -traded funds – have come in the last few years.

While they remain valued by investors because they are cheaper than mutual funds and because they can track market indexes, the survey also demonstrates just how diverse and dynamic the sector has become as well.

This is important for self-directed investors who may not have fully appreciated just how wide ranging the market is now, and just how many different themes and strategies are available to them.

“Active strategies, thematics and new assets like SPACs and cryptocurrencies have helped redefine what ETFs are and are also paving the way for future growth,” said Jean-René Giraud, founding CEO of TrackInsight. “With the current tailwinds and seemingly unstoppable rise of ETFs, the industry is on track to near the $10 Trillion AuM milestone this year.”

2020 saw a flurry of new ESG ETF launches

More ESG ETFs were launched in 2020 than the previous two years combined with 202 new ESG ETF launches and 12 existing trackers switching to an ESG benchmark. There is now a pool of 549 ESG ETFs to choose from according to TrackInsight. Assets in these funds were also up, almost tripling from $58.8bn to $174.6bn.

ETFs are evolving too: while investors expect them to be straightforward, transparent and liquid, they are no longer restricted to plain vanilla trackers. The emergence of active, smart beta and thematic strategies mean that investors are having to be more selective and use different criteria like ESG ratings, brand, size of fund and risk/return profile. These are disciplines used when evaluating mutual funds and hedge funds too, so it is interesting to see ETF liquidity and costs ranking top of investors’ shopping lists when it comes to kicking the tyres on ETFs.

Gold ETPs now account for over a third of global bullion

Gold had a big year in 2020 as many investors used ETPs (exchange traded products) to put money into the precious metal as the global pandemic took hold – according to the World Gold Council, physically-backed gold trackers made up one third of global gold demand. Investors are also paying more attention to where that gold bullion in the ETPs has come from. ETPs backed by  London Bullion Market Association (LBMA)-accredited responsibly sourced gold (which protects the global supply chain for the wholesale precious metals markets) are becoming the product of choice for many investors.

TrackInsight notes that gold ETPs passed the liquidity test when the underlying market was dislocated during the disruption of the physical bullion market in the first wave of the pandemic. The higher the number of liquidity providers that cover an ETP, the more competitive its pricing will be. This reduces liquidity risks during periods of market stress. It is an important consideration for traders buying into gold during such times. Consequently, while there was an extreme spike in bid-ask spreads in March/April last year. However, subsequent to that, spreads have remained competitive, despite sustained flows into gold ETPs.

The other big story has been the emergence of thematic ETF as a big part of the universe. They seek to target high growth potential emerging trends and businesses with the “implicit bet” that this theme will outperform the overall market over time. Excluding leveraged and currency ETFs, of the best performing ETFs in 2020, the top 20 were all thematic and all delivered far in excess of 100% returns.

The emergence of active ETFs

The other big story for ETFs last year was the emergence of active ETFs – funds which trade like ETFs but are actually being actively managed, more like a conventional fund. Asset managers have woken up to the fact that investors like the transparency and liquidity of ETFs, but would still be prepared to consider specific investment strategies if they are packaged in an ETF.

In 2020 alone there were 274 new active ETFs brought to the market from 91 different issuers, and for 38 of these issuers, their active ETF was their debut ETF launch. TrackInsight says there are already more than 1100 active ETFs listed worldwide. AuM in active ETFs grew from $176bn to $273bn in 2020. Almost $80bn of this came from new flows.

“When you pair TrackInsight’s survey results with what we’ve seen in terms of flows into ETFs over the past year, it’s clear that investors’ understanding of the role of ETFs in portfolios continues to deepen; this includes many investors diversifying their exposure beyond traditional ETFs,” said Olivier Paquier, Head of ETF Distribution in EMEA at J.P. Morgan Asset Management. “We’ve seen growing interest in thematic, actively managed and ESG ETFs; trends which are still at their early stages, both in terms of investor uptake and product offerings. We believe the ESG ETF trend in particular has a lot of room for growth.”

To receive a copy of the survey results please register with TrackInsight.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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