Brown Brothers Harriman & Co. (BBH) has released a survey report on Greater China ETFs, the report being a subset of the 10th annual Global ETF Investor report, and represents the opinions of more than 100 institutional investors, financial advisers and fund managers from the Mainland, Hong Kong and Taiwan. In total, 59 per cent of respondents manage over USD1 billion in assets.
Key findings:
· The report finds that the number of investors with more than 25 per cent of their portfolio invested in ETFs is up 11 per cent from 2022.
· ETFs are integral components of investors’ portfolios: Investors in Greater China continue to allocate capital to ETFs and 75 per cent of investors expect their use of ETFs to increase this year.
· Mainland investors’ demand for Hong Kong listed ETFs increases: 69 per cent of these investors purchase Hong Kong listed ETFs through the existing cross-border programs. 62 per cent of Mainland investors are interested in managed risk strategies, while 43 per cent prefer ESG or thematic strategies via ETF inclusion in Stock Connect.
· Thematic ETFs expand their reign: Over 90 per cent of investors are planning to increase or maintain their exposure in thematic ETFs. Internet/Technology, Robotics & AI and ESG are the top three thematic strategies in demand.
· Flight to safety continues: Given market volatility, 85 per cent of investors in the region prefer managed risk strategies. 79 per cent of investors also expect to increase their exposure to ETFs with dividend/income strategies.
· Macro trends fuel appetite for fixed income: Investors are turning to fixed income ETFs at a rapid rate due to the interest rate environment. 50 per cent of investors are planning to allocate to fixed income ETFs this year with short duration/money market exposure being the top choice.
· Optimistic about ESG: 62 per cent of investors in the region are planning to allocate to ESG investments. In terms of ESG ETFs, most investors are evaluating products by reviewing company statements/reports for underlying holdings.
· Active is on the rise: 50 per cent of investors allocated from index and active mutual funds to actively managed ETFs. 88 per cent of investors plan to increase or maintain their exposure in actively managed ETFs as more of these products are introduced.
· Investors use ETFs to adapt strategy: As portfolios shift to align with the market cycle, respondents are using smart beta ETFs to mitigate risk (65 per cent), reduce volatility (54 per cent) and generate income (49 per cent).
“Despite market turbulence, investors in the region are turning to ETFs as tools to navigate risk and diversify portfolios. ETFs are playing an increasingly vital role in investors’ asset allocation strategies and our survey highlights the resounding interest from investors across a wide range of strategies and asset classes,” says Chris Pigott, Asia Head of ETF Services at BBH.
“The responses support that the ETF wrapper is an optimal vehicle for a wide range of exposures and we are seeing asset managers listing a diverse set of products in the region. Investors across the region do have different approaches to selecting ETFs or how they access the product, and throughout the survey we focus on these nuances that asset managers need to consider as part of their ETF strategy.”
