Global ETF Study 2020 - J.P. Morgan
[Pages:57]Global ETF Study
2020
AGENDA
EXECUTIVE SUMMARY
1
ETF Market Growth: The Rising Role of active and smart beta ETFs and ESG ? 5-22
2
ETF Benefits and Risks ? 23-32
3
Active ETFs ? 33-48
4
Fixed Income ETFs ? 49-56
2 | GLOBAL ETF STUDY 2020
EXECUTIVE SUMMARY: MOVING TO ETFS AS TOOLS TO SOLVE SPECIFIC PROBLEMS
THE TREND TO ACTIVE AND SMART BETA ETFS AND ESG ETFs are increasingly used for active and smart beta investing, in addition to passive investing. By 2023, respondents expect around 40% of ETF allocation in their client portfolios to be in active or smart beta ETFs. ESG and thematic ETFs are key growth areas, with active ETFs seen by larger investors in particular as suitable for ESG investing.
LOW COST AND LIQUIDITY THE BIGGEST BENEFITS Low cost investment is the most important benefit of ETFs, followed by ease of trading/liquidity. For respondents with a lower AUM, diversification and risk management are important benefits. However, liquidity in a bear market is seen as one of the biggest risks of ETFs, followed by market distortion.
ACTIVE ETFS ARE USED FOR SPECIFIC AIMS Those with higher AUMs are more likely to see active ETFs as a tool to add alpha, but otherwise active ETFs are seen as most suitable for targeted investing and achieving specific aims, such as ESG. Track record is the most important factor when selecting an active ETF provider, followed by investment philosophy and trading expertise.
COST AND CONTROL KEY TO FIXED INCOME ETFS Reducing cost and adding control are seen as key benefit of fixed income ETFs, as well as simplifying bond exposures. Increasing the product range is seen as key to expanding the use of fixed income ETFs, as this would give exposure to sectors of interest, such as corporate, high yield and emerging market debt.
J.P. MORGAN ASSET MANAGEMENT | 3
SAMPLE BREAKDOWN
EMEA
120
Global
320
United States
120
Asia Pacific
40
Latin America
40
23%
Non-user
77%
User
24%
23%
25
21%
17%
20
Total AUM USD 12.9 trillion Average AUM USD 40.3 billion
15
Independent Wealth / Asset Manager
6%
Discretionary Fund Manager
6%
Independent Advisor / Broker
Private Bank / Bank trust
3%
Fund of Funds
Insurance Company
Investement Platform Provider for DC Plan
10
5
0
Less than USD 500m USD 1bn
USD 5bn USD 20bn USD 50bn USD 250bn
USD 500m to less than to less than to less than to less than to less than or more
USD 1bn USD 5bn USD 20bn USD 50bn USD 250bn
4 | GLOBAL ETF STUDY 2020
1. ETF Market Growth: The Rising Role of active and smart beta ETFs and ESG
J.P. MORGAN ASSET MANAGEMENT | 5
INVESTORS CONTINUE TO MAKE MORE USE OF ACTIVE AND SMART BETA ETFS
? The respondents to the study are increasing their use of active and smart beta ETFs. In two to three years' time, the respondents expect active and smart beta ETFs to each take around one-fifth of their clients' portfolios.
? While the use of active and smart beta ETFs is rising, these styles are still mainly within the equity and fixed income asset classes according to the results.
6 | GLOBAL ETF STUDY 2020
Q1. Approximately what percentage of your clients' overall portfolio is allocated to the following? Has this changed over the last 3 years and how do you expect it to change over the next 2-3 years?
3 years ago
Today
Next 2?3 years
Active v Passive
Passive ETFs
80%
69%
61%
Active ETFs
12%
16%
21%
Smart Beta
8%
15%
18%
Asset class
3 years ago
Equity ETFs
66%
Fixed Income ETFs
23%
Alternatives ETFs
6%
Multi-Asset ETFs
4%
Other ETFs
2%
Today
63% 24% 7% 4% 3%
Next 2?3 years
62% 23% 8% 4% 3%
J.P. MORGAN ASSET MANAGEMENT | 7
ACTIVE ETFS SET TO BECOME OVER A QUARTER OF PORTFOLIOS IN THE US
? The biggest move away from passive ETFs to active ETFs is reported by respondents from Latin American, followed by the US and then EMEA.
? Respondents in the EMEA region are the most diversified among different asset classes by region. Asset allocation is also relatively stable over time by region, reinforcing that ETF diversification is predominantly by ETF style, ahead of the underlying asset classes used.
8 | GLOBAL ETF STUDY 2020
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