As ETFs continue to take over investing, this is what everyone is talking about

Trader Talk

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., January 10, 2020.

Brendan McDermid | Reuters

The Inside ETF conference is underway in Hollywood, Florida. 2,000 investment professionals have gathered to talk what’s hot, and what’s not, in investing in 2020.

At a dinner last night with ETF leaders, several topics dominated the discussion: ESG (Environmental Social and Governance), actively managed ETFs, fixed income, and a continuing fascination with disruptive technologies as a major theme for future investing.

Those themes were echoed in a report out this morning from Brown Brothers Harriman in partnership with etf.com, which released its 7th Annual ETF survey of 300 institutional investors, financial advisers, and fund managers from around the world.

Highlights from the survey:

1) ETF adoption still going strong. One-third of the investors already allocate 25% to 50% of their portfolio to ETFs. 72% of US respondents plan to increase portfolio allocations to ETFs in 2020.

2) ESG: not a passing fad. 2019 was the year Environmental Social and Governance (ESG) finally attracted assets. The numbers are still small, but that may be about to change. 69% of US investors surveyed said they plan to increase allocations to ESG ETFs in 2020.

3) Active ETFs are gaining traction. Actively managed mutual funds that have been seeing outflows for years have a new plan: convert to an ETF. The SEC recently approved a number of new types of active ETF structures that do not require daily disclosures of the fund holdings — that will likely attract more money into ETFs and out of mutual funds. The BBH report notes that US investors ranked active as the number one strategy (tied with low volatility ETFs) they would like to see more of in the market. 62% of US investors plan to increase their exposure to actively-managed ETFs.

4) Fixed income continues to attract assets, mostly as a defensive play. The prospect of volatile global markets in 2020 has generated outsized interest in fixed income ETFs. For the second year in a row, investors ranked the group as their go-to product type in periods of heightened volatility.

5) Disruptive technology is a major theme for ETF investors: high level of interest in ETFs investing in internet, robotics, environment/sustainability, cryptocurrency.

6) Low volatility ETFs find an audience. Investors in the U.S and Greater China both ranked managed risk/low volatility as the top ETF strategy (tied with active in the US) they would like to see more of in the market.

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