The global ETF survey from Trackinsight for 2022 is prefaced by an introduction from Jean-René Giraud, the firm’s founder and CEO, who sadly is no longer with us as we read the report.
Giraud’s enthusiasm for the industry is clear, as he comments on the growth in assets to over USD10 trillion at the end of last year and says: “What is probably most striking is that nearly half of new investments into collective schemes (mutual funds, UITs and ETFs) have found their way to ETFs, signalling a clear shift of end investors’ interest towards the listed structure.
“If the growth of the last 20 years has been mainly fuelled by the slow but persistent transition from active to passive management, one should not forget that ETFs are not only trackers. Our 2022 survey clearly demonstrates a significant inflexion of the industry towards high value propositions, from thematic and ESG investing to active strategies in the US where the SEC recently introduced semi-transparent models perfectly fit for the transition of active strategies to an ETF format.”
For Giraud, the question is therefore not if, or when, ETFs will take over mutual funds but rather how the convergence between the two will materialise.
“Changes to come will most likely be related to distribution channels which are also seriously disrupted by emerging modern digital investment platforms,” he writes.
“ETFs represent an incredible opportunity to rethink the value proposition delivered to investors who are hungry for investment purpose and relevant education and advice.
“Digital and automated investing are developing fast, improving distributor operational efficiency. This will possibly allow for some cost savings to be passed to investors, but in the end will simply replace one intermediary by another.”
The report finds that even though thematic investing is not new, thematic ETFs surged in popularity in 2021 as more and more investors looked to ride disruptive and high-growth trends and profit from society’s structural changes.
“The Covid crisis and its repeated lockdowns have transformed the way we live and work at a global level. Under those circumstances, unique investment opportunities emerged, directly benefitting from such structural changes which created new thematic investment opportunities.
“In parallel, many bored people stuck at home suddenly found a new passion in the financial markets, participating in meme investments as well as in pioneering future-driven industries.”
Thematic ETFs have been a boon to financial marketers and salespeople as their accessible and story-driven investment thesis’s have helped make investing interesting, relevant and exciting again, the report says.
“Their initial success with investors prompted more providers to join the party, resulting in a flurry of new launches. Over 2021, more than 300 thematic ETFs were listed on exchanges around the globe, bringing the total universe to nearly 800 thematic ETFs as of end-of-year 2021.
“Along with the growth in the number of funds available, thematic ETFs saw their assets under management (AuM) skyrocket. By end of 2021, they broke through the USD250 billion mark, a three-fold increase since the beginning of 2020.”
Even though newly popular spaces often have impressive growth figures, the thematic ETF universe is a trend picking up speed around the world, the report finds.
“With USD186 billion, America gathers most of the assets invested in themes currently, but Europe is growing fast. With only USD67 billion invested as of the end of 2021, Europe could be catching up soon. Investors in the old continent increased the total capital invested in themed funds by +72 per cent in 2021. This is to compare with a +32 per cent increase for America over the same period.”