The ETF industry has experienced remarkable growth, reaching a total of $12.71 trillion in global assets. As we look ahead to 2024, it becomes evident that ETFs have become a vital component of investors’ portfolios, with a growing trend of investors planning to increase their usage of ETFs in the coming year.
According to the Brown Brothers Harriman 2024 Global ETF Investor Survey, 82% of investors globally are planning to increase their use of ETFs. In the United States, this number is even higher, with 97% of investors expressing their intent to increase their ETF usage.
Not only are investors planning to increase their usage of ETFs, but they are also diversifying their portfolios by working with multiple issuers. The survey revealed that 74% of ETF investors plan to increase the number of issuers they work with. Additionally, 78% predict an increase in their overall exposure to active ETFs in the next 12 months.
The demand for additional product choices in the active ETF market is particularly notable in the fixed income and liquid alternative categories. The survey respondents expressed a strong interest in these areas, with 70% predicting increased exposure to fixed income ETFs and approximately 23% expressing bullishness on digital currency/Bitcoin as an asset class.
Key Takeaways:
- 82% of global investors plan to increase their usage of ETFs in 2024.
- 97% of U.S.-based investors intend to increase their ETF usage.
- 74% of ETF investors plan to work with multiple issuers.
- 78% predict an increase in exposure to active ETFs in the next 12 months.
- Fixed income and liquid alternative ETFs are gaining traction among investors.
This promising growth in ETF usage and investor demand presents a unique opportunity for ETF providers to refine their marketing strategies. In the following sections, we will delve deeper into the various aspects of ETF marketing, including the rise of active ETFs, the expanding landscape of ETF providers, the significance of fixed income ETFs, the emergence of digital currency ETFs, and the continuing trends in ETF marketing strategy.
As we explore these topics, it is essential to recognize the current landscape and anticipate the future trends and opportunities within the ETF industry. The outlook for ETFs in 2024 is optimistic, with increased demand across various asset classes and regions. By understanding these market dynamics and evolving investor preferences, ETF providers can design effective marketing strategies to capture the attention and trust of investors looking to maximize their investment potential.
Investing in ETFs: A Growing Trend
According to recent statistics, the global ETF market is on a steady rise, and ETFs have become increasingly popular among investors. The assets of ETFs are expected to reach US$14 trillion by the end of 2024, demonstrating their significant growth since their introduction in 1993 as the first U.S. product.
One of the key factors driving this growth is investors’ preference for low-cost index investments. ETFs offer a cost-effective way to gain exposure to a diversified portfolio of securities, providing investors with the opportunity to diversify their investments while keeping fees low. With transparency in wealth management fees increasing and a shift towards asset-based fees rather than brokerage commissions, ETFs are becoming an attractive option for investors.
Moreover, regulatory initiatives such as the Markets in Financial Instruments Directive II (MiFID II) in Europe are pushing for fee transparency for financial advisors, further enhancing the appeal of ETFs. This increased transparency ensures that investors have a clear understanding of the fees associated with their investments.
Another reason for the growing popularity of ETFs is the rising demand for quality investments and cost sensitivity among investors. As bond liquidity declines, bond ETFs are gaining popularity due to their efficient market access, offering investors a way to navigate the fixed income market more effectively.
Investors are increasingly turning to ETFs as a strategic investment tool to potentially outperform the market and emphasize asset allocation over security selection. ETFs provide them with a diversified investment option that can serve as core broad market exposures in their portfolios, whether they are retail investors or institutions.
Index investing is also gaining traction as investors recognize the high costs associated with stock-picking, which can erode long-term returns. By investing in ETFs that track well-established indexes, investors can achieve broad market exposure and potentially benefit from lower costs.
In terms of market share, ETFs have reached impressive total assets under management (AUM) of $6.7 trillion across the US and Europe as of the end of December 2022. They have been growing at a compound annual growth rate (CAGR) of approximately 15% since 2010, almost three times faster than traditional mutual funds.
The future looks promising for ETFs, as they are expected to account for 24% of total fund assets by 2027, up from the current 17%. The ETF market has been experiencing a growth rate of 16% per annum from 2016-2022, outperforming mutual funds, which have grown at a rate of 5% per annum during the same period.
To cater to the increasing demand and evolving investor preferences, the ETF market has seen a rise in innovative, active ETFs. These ETFs offer differentiated strategies and environmentally and socially responsible investing products, capturing the interest of investors.
| Key Statistics | ETF Market | Mutual Funds Market |
|---|---|---|
| Compound Annual Growth Rate (CAGR) since 2010 | 15% | 5% |
| New fund launches in 2022 | 70% were ETFs | N/A |
| Growth rate from 2016-2022 | 16% per annum | 5% per annum |
| Forecasted growth rate from 2022-2027 | 13% to 18% per annum | N/A |
| Average fees | Lower than mutual funds | Higher than ETFs |
As the ETF market continues to grow, smaller fund providers are expected to outgrow larger traditional counterparts. The trend towards innovative, active ETFs is also likely to continue, with Tier 3 providers ($10-$50 billion AUM) and Tier 4 providers (
Overall, the increasing popularity of ETFs is a testament to their benefits and the value they bring to investors. As the market expands and evolves, investors can expect a wider range of ETF options to choose from, enabling them to build diversified portfolios and achieve their investment goals.
The Rise of Active ETFs
The investment landscape has witnessed a significant rise in the popularity of Active ETFs in recent years. These innovative investment vehicles offer investors a unique approach to growing their portfolios while providing flexibility and personalization.
Active ETFs, unlike their passive counterparts, have gained traction by employing dynamic investment strategies. Portfolio managers have the discretion to buy or sell securities, aiming to outperform benchmarks rather than merely tracking them. This active investment strategy allows for potential higher returns and the opportunity to capitalize on unique market opportunities.
Post-pandemic, investors are increasingly considering active strategies as they seek to adapt to the ever-changing market conditions. Active ETFs offer the benefits of transparency of holdings and intraday liquidity, providing investors with a clear view of their investments and the ability to buy or sell shares throughout the trading day.
One area where active ETFs have shown significant growth is fixed income. Fixed income strategies are difficult to replicate, making them well-suited for the ETF structure. In Europe, there has been a notable increase in interest in active fixed income ETFs, while active equity ETFs have become more prevalent in the United States due to tax benefits.
The statistics speak for themselves. In 2022, assets invested in active exchange-traded funds grew by a staggering $121 billion, reaching a total of $341 billion. This growth outpaced the overall growth of ETFs, highlighting the increasing investor interest in active strategies. Traditional Mutual Funds, on the other hand, faced significant outflows nearing $800 billion in the same year.
Looking ahead, the momentum behind active ETFs remains strong, particularly in the fixed income space in Europe. In fact, 62% of firms are considering structuring their new products as active ETFs in the upcoming year, a clear indication of the industry’s confidence in this investment vehicle.
Active ETFs are also valued for their ability to attract the next generation of investors. These sophisticated and informed investors seek personalization, tax benefits, flexibility, and values-based investment decisions. As a result, active ETFs were the top choice for new product development in 2023.
| Statistic | Value |
|---|---|
| Annual Growth Rate of Active ETFs | 38.4% |
| Percentage of ETF Investors Predicting Increased Portfolio Exposure to Active ETFs in the Next 12 Months | 78% |
| Percentage of ETF Investors Who Purchased at Least One Active ETF in the Past 12 Months | 80% |
This rise in active ETFs can be attributed to their unique investment strategy, which offers investors the opportunity to outperform benchmarks and adapt to changing market conditions. With the growing interest in active strategies and the potential for higher returns, active ETFs are poised to play an increasingly important role in investors’ portfolios.
ETF Provider Relationships and Expansion
The growing popularity and demand for ETFs have led to an expansion of the industry, with investors seeking to diversify their portfolios. According to a survey conducted by Brown Brothers Harriman, 74% of ETF investors plan to increase the number of issuers they work with, indicating a desire for a wider range of investment options.[1]
This increasing interest in working with multiple issuers reflects the evolving needs of ETF investors who are looking to access different asset classes and investment strategies. With 82% of investors globally indicating they would increase their use of ETFs and 97% of US-based investors planning to increase their ETF usage, the demand for diverse offerings is clear.[2][3]
The survey also revealed specific areas of interest for ETF investors. 43% of respondents sought additional choices in active fixed income ETFs, while 42% expressed interest in liquid alternatives for diversification purposes. These findings highlight the growing demand for more options in the active ETF market and the desire to explore different asset classes.[4][5]
Furthermore, the survey indicated that 78% of ETF investors predict an increase in their overall portfolio exposure to active ETFs in the next 12 months. This shows investors’ confidence in active ETFs as a valuable component of their investment strategies.[6]
The data from the survey supports the idea that ETF investors are looking to expand their investment opportunities by working with multiple issuers and exploring different asset classes. This expansion of relationships with issuers allows investors to access a broader range of investment options, enhancing their ability to diversify their portfolios and potentially improve their investment outcomes.[1]
Predicted Increase in Overall Portfolio Exposure to Active ETFs
| Statistic | Percentage |
|---|---|
| ETF investors predicting increase in overall portfolio exposure to active ETFs in the next 12 months | 78% |
The growing interest in active ETFs is expected to drive further innovation and expansion in the industry. ETF providers are likely to develop new products and strategies to meet the demands of their clients, offering more choices and opportunities for investors seeking investment diversification.[6]
Overall, the survey results indicate that ETF investors are looking to build relationships with a wider range of issuers and explore different asset classes within the ETF space. This expansion of ETF provider relationships reflects a growing need for investment diversification and access to a broader range of investment options. As the ETF industry continues to grow and evolve, investors can expect to see increased choices and opportunities to meet their investment objectives.
Sources:
- [1] Brown Brothers Harriman survey
- [2] Global ETF inflows data
- [3] ETF investor survey data
- [4] Survey data on active fixed income ETFs
- [5] Survey data on liquid alternatives
- [6] ETF investor predictions for active ETFs
- [7] Morningstar data on ETF providers and capital gains payments
The Growing Importance of Fixed Income ETFs
When it comes to diversifying investment portfolios, fixed income ETFs are gaining significant traction in the market. With a positive financial risk sentiment and a desire for risk management, investors are increasingly turning to fixed income ETFs to enhance their returns and mitigate volatility. According to the Brown Brothers Harriman survey, 70% of ETF investors predict increased exposure to fixed income ETFs in the coming 12 months, highlighting their growing importance.
Fixed income ETFs offer investors access to a wide range of fixed income assets, including corporate bonds, non-U.S. sovereign debt, and mortgage-backed or asset-backed securities. These ETFs provide potential capital preservation and returns, making them an attractive option for investors seeking stability and income generation.
The data from the survey also indicates that fixed income ETFs are seen as a way to manage risk effectively. As investors aim to protect their portfolios from fluctuations in the equity market, fixed income ETFs serve as a reliable alternative. By diversifying their investments, investors can reduce the overall risk exposure of their portfolios and achieve a more balanced and resilient investment strategy.
Fixed income ETFs offer additional advantages over traditional fixed income investments. They provide increased liquidity for investors compared to over-the-counter bond transactions, as they are traded thousands of times throughout the day on the exchange. This liquidity ensures that investors can easily buy and sell their ETF shares at fair market prices, improving their flexibility and access to capital.
A notable player in the fixed income ETF market is iShares, which has around $816 billion in assets under management (AUM) out of a total of $1.99 trillion corresponding to fixed income ETFs globally. iShares’ bond ETFs have consistently outperformed their peers, reflecting their competitive performance in the fixed income market. Additionally, iShares bond ETFs cost 77% less on average compared to active mutual funds, making them a cost-efficient investment option.
To further underline the significance of fixed income ETFs, trading volumes historically rise during periods of heightened stress in bond markets. This increased activity ensures that investors have access to liquidity even during turbulent times, enhancing their confidence and allowing them to navigate market volatility more effectively.
Overall, the growing importance of fixed income ETFs stems from their ability to provide investors with diversification, risk management, competitive performance, and liquidity. As more investors recognize the benefits, we can expect to see continued growth in the popularity of fixed income ETFs as an essential component of investment portfolios.
The Rise of Digital Currency ETFs
The digital currency market, particularly Bitcoin, has been gaining significant attention as an alternative investment option. With the approval of the first Bitcoin spot ETFs for retail markets in January 2024, the world has witnessed a substantial influx of capital into this asset class. On their first trading day, these Bitcoin ETFs achieved a combined $4.6 billion in trading volume, signaling the immense interest and potential in this emerging market.
Investors are increasingly recognizing the value of digital currency ETFs as a way to gain exposure to the Bitcoin asset class. According to a Brown Brothers Harriman survey, approximately 23% of investors expressed bullish sentiments towards digital currencies, such as Bitcoin, over the next 12 months. This indicates a growing appetite for alternative investments with high growth potential.
Digital currency ETFs offer several advantages to investors. Firstly, they provide a simplified and streamlined way to invest in digital currencies. With these ETFs, investors can conveniently trade digital currencies from their brokerage accounts, eliminating the complexities associated with purchasing and storing cryptocurrencies directly. Additionally, digital currency ETFs offer diversification within the crypto world, allowing investors to spread their risk across different currencies and tokens.
However, it’s important to note the inherent risks associated with investing in the digital currency market. The cryptocurrency market is characterized by high volatility and an unregulated nature, even when trading through regulated exchanges in the U.S. Furthermore, digital currency ETFs come with considerable expense ratios, ranging from 0.39% to 1.5%. These expense ratios are significantly higher than the transaction fees charged by traditional crypto exchanges.
The Future of Digital Currency ETFs
Despite the risks, the rise of digital currency ETFs is expected to continue. The ETF industry has experienced tremendous growth, reaching a milestone of $12.71 trillion in global assets. Active ETFs, in particular, have grown at an impressive 38.4% annual rate over the past 10 years.
Investors are increasingly embracing ETFs as a part of their investment strategy. Globally, 82% of investors indicated that they would be increasing their use of ETFs, while in the U.S., a staggering 97% of investors are planning to increase their ETF usage. Moreover, 74% of ETF investors plan to work with a greater number of issuers, reflecting their desire for a wider range of options.
Looking ahead, 78% of ETF investors predict an increase in their overall portfolio exposure to active ETFs in the next 12 months. An overwhelming 80% of ETF investors have already purchased at least one active ETF in the past 12 months, with nearly half of them shifting capital from index mutual funds. These trends suggest a growing demand for digital currency ETFs as investors seek innovative ways to diversify their portfolios and capture potential growth opportunities.
| ETF Asset Class | Investor Sentiment |
|---|---|
| Digital Currencies/Bitcoin | 23% |
| Alternatives | 18% |
| Equities | 17% |
Table: Investor Sentiment towards Different Asset Classes
Persisting Trends in ETF Marketing Strategy
The ETF industry continues to evolve, adapting to changing investor preferences and market dynamics. In 2024, several trends in ETF marketing strategy have emerged, shaping the industry landscape and influencing investment decisions. Understanding these trends can provide valuable insights for investors and industry professionals.
1. Options Overlay ETFs: Downside Protection and Innovative Opportunities
Options overlay ETFs have gained significant traction in 2024, reflecting the growing demand for downside protection and innovative investment opportunities. These ETFs combine traditional equity or fixed income strategies with options contracts, providing investors with enhanced risk management and potential upside participation.
The appeal of options overlay ETFs lies in their ability to offer downside protection during market downturns while still providing exposure to the underlying asset class. This strategy aligns with investors’ desire for more control over their portfolio risk and the potential for improved risk-adjusted returns.
2. Concentrated Equity ETFs: Actively Managed Conviction Ideas
Concentrated equity ETFs, which focus on a limited number of high-conviction holdings, have gained popularity among investors seeking active management and decisive investment strategies. These ETFs are managed by experienced portfolio managers who aim to outperform their benchmarks by selecting their top ideas.
Investors are drawn to concentrated equity ETFs for their potential to generate alpha and their active management approach. By investing in a concentrated portfolio, these ETFs allow investors to participate more fully in the success of specific companies or sectors they believe in, potentially outperforming broader market indices.
3. Shorter-Duration Fixed Income ETFs: Yield, Flexibility, and Lower Rate Risk
In a low-interest-rate environment, investors are increasingly turning to shorter-duration fixed income ETFs to enhance yield, reduce interest rate risk, and gain greater flexibility in their fixed income portfolios. These ETFs focus on bonds with shorter maturities, resulting in potentially higher yields and lower sensitivity to interest rate movements.
Shorter-duration fixed income ETFs provide investors with a viable alternative to traditional fixed income investments, such as longer-duration bonds or certificates of deposit, which may offer lower yields. By focusing on shorter maturities, these ETFs offer attractive yields while mitigating the potential impact of rising interest rates.
Industry Overview
These persisting trends in ETF marketing strategy reflect the industry’s commitment to meeting investor needs and staying ahead of market developments. The ETF industry has experienced significant growth, with US exchange-traded funds collecting over $195 billion in the first quarter of 2024 alone.
| ETF Industry Statistics | Flows ($ billion) |
|---|---|
| Stock ETFs | $76 |
| Bond ETFs | $50+ |
| Active ETFs | $66 |
These figures highlight the continued growth and success of various ETF categories, such as stock ETFs, bond ETFs, and active ETFs. Investors are increasingly recognizing the benefits of ETFs in their diversified investment portfolios, driving the industry’s overall growth.
As the ETF industry continues to evolve, it is essential for investors and industry professionals to stay informed about the latest trends and successful approaches. By understanding these trends, investors can make informed decisions and capitalize on the opportunities presented by the dynamic ETF landscape.
The Outlook for ETFs in 2024
As we enter 2024, the ETF industry continues to experience significant growth and evolution. The outlook for ETFs in the coming year is shaped by a combination of market trends, investor behavior, and industry predictions. Let’s explore what lies ahead for the ETF industry in 2024.
The Growing Influence of ETFs
According to recent data, ETFs accounted for 13% of equity assets and 2.8% of fixed income assets in the U.S. at the beginning of Q1 2024. This demonstrates the increasing popularity and adoption of ETFs as investment vehicles across various asset classes.
Individual investors in the U.S. held nearly $1.4 trillion in ETF assets in Q1 2024, representing 19% of all U.S.-listed ETF assets. This robust figure highlights the significant role that individual investors play in driving the growth of the ETF industry.
Key Predictions for 2024
Industry experts have put forth several predictions for the ETF industry in 2024. These predictions provide insights into the potential opportunities and challenges that lie ahead:
- Active ETFs: Active ETFs are expected to gain traction among alpha-seeking investors, with increased demand for actively managed strategies within the ETF wrapper.
- Market Consolidation: Given the crowded nature of the ETF market, it is anticipated that there will be an increase in ETF closures as providers reassess their product offerings.
- Bond ETFs: The launch of bond ETFs and inflows into fixed income ETFs are projected to accelerate, reflecting investors’ desire for diversified fixed income exposure and liquidity.
- Alternative ETFs: The popularity of alternative ETFs, such as thematic ETFs and smart beta strategies, is expected to continue to grow as investors seek differentiated investment opportunities.
- Covered-Call ETFs: There might be a potential slowdown in the growth of covered-call ETFs, which have experienced significant growth in recent years.
- ETF Fees: After years of declining fees, there could be a reversal in this trend as providers aim to maintain profitability and differentiate themselves in the competitive ETF landscape.
The Role of Secondary Market Activity
Secondary market activity remains a significant driver of ETF trading. U.S.-listed ETFs accounted for 28.1% of total U.S. composite volume in the secondary market in Q1 2024, underscoring the importance of liquidity and price discovery.
ETF trading activity is mostly concentrated in the secondary market, with bid-ask spreads tightening to 22.3 basis points in Q1 2024. This trend reflects improved market efficiency and increased investor confidence in the ETF product structure.
The Growth of the Passive ETF Market
In recent years, the Passive ETF Market has witnessed substantial growth and is projected to continue its upward trajectory. By 2031, the market is expected to reach a valuation of USD xx.x Billion, displaying a compound annual growth rate (CAGR) of xx.x% from 2024 to 2031.
Manufacturers such as BlackRock Fund, Vanguard, UBS Group, Fidelity Investments, and State Street Global Advisors are among the key players driving the growth of the Passive ETF Market worldwide.
The United States, especially North America, is projected to experience significant growth in the Passive ETF Market. This growth is influenced by advancements in technology and the presence of major industry players.
Europe is also expected to exhibit an impressive Compound Annual Growth Rate (CAGR) from 2024 to 2031, with increased investments in the sector.
Conclusion
In 2024, the ETF industry is poised for continued growth and innovation, with ETFs becoming an increasingly popular investment tool for achieving financial goals. The rise of active ETFs and the expansion of ETF provider relationships are shaping ETF marketing strategies, allowing investors to access a wider range of investment opportunities.
However, it is important to note that the ETF market also presents certain challenges. Liquidity risks can arise from hundreds of ETFs with low trading volumes, potentially impacting pricing and trading practices. Regulatory risks, including changes in tax regulations and oversight, can also affect the after-tax profitability of ETFs.
Despite these challenges, ETF marketers can navigate the landscape successfully by leveraging trends such as the growing importance of fixed income ETFs and the rise of digital currency ETFs. By staying informed about the latest industry developments and employing effective marketing strategies, asset management firms can attract investors and position their ETF products effectively in the market.
It is crucial for marketers to consider factors like bid-ask spread, trading volumes, and assets under management to ensure optimal liquidity in ETF trading. Additionally, investors should carefully evaluate ETF fees, including management fees and other expenses, when selecting funds to maximize their investment returns.
As the ETF industry continues to evolve, drawing conclusions from quantitative analysis, harnessing the power of AI and machine learning, and utilizing data visualization techniques can enable informed decision-making and identification of investment patterns. By adopting precise targeting tactics and leveraging various advertising platforms, including search engine marketing and LinkedIn Ads, asset management firms can effectively engage potential investors and drive successful marketing campaigns.
