Institutional investors’ and
advisers’ usage of exchange-traded funds (ETFs) continues to evolve and
the products are becoming a cornerstone of their portfolios, suggests a
study by Brown Brothers Harriman (BBH) and ETF.com.
The 2016 US
ETF Investor Survey found one-third hold at least 11 ETFs in their
portfolios. For the second year in a row, the largest number of
respondents have six to 10 ETFs in their portfolios.
percent of investors plan to maintain or add to their smart-beta
positions next year. Minimum volatility (44%) and quality strategies
(42%) are top priorities when selecting a smart-beta ETF.
are looking for more options when it comes to ETFs with international
fixed income and commodity exposure. For the third year in a row, more
investors are looking for fixed income in actively-managed ETFs, the
survey found. Sixty-seven percent of respondents stated that liquidity
is an important concern for fixed income ETFs. In addition, nearly
two-thirds of ETF investors would consider an ETF engaging in securities
“Investors are finding new avenues to use ETFs, and
they want more options for active ETF, smart beta and fixed income
products,” says Shawn McNinch, Global Head of ETF Services at BBH. “This
year’s survey demonstrated that investors are gaining comfort in
employing factor based strategies through smart-beta ETFs and using
these products to position their portfolios against volatility and
uncertainty, often by reducing allocations to active and even
traditional cap-weighted strategies.”
Thirty-seven percent of
respondents stated that environmental, social and governance (ESG)
factors are important when selecting an ETF.
The survey also
found 75% of investors are comfortable buying an active ETF with a track
record of three years or less, and almost two out of three are
comfortable with buying new passive ETFs in the first year.
outlook on ETFs suggests more willingness to use strategies with
shorter track records, both for passive and active funds. For ETF
issuers, these results support an increase in ETF product development
and a focus on clearly defined distribution strategies in a competitive
market,” says McNinch.
The 2016 survey polled 175 financial advisers and institutional investors. The full study report may be downloaded from www.bbh.com/etfsurvey.