The BBH 6th Annual Greater China ETF Investor Survey has cast a fascinating light on the world of ETFs and their growing importance to investors. This market is particularly strong in the Far East, where innovation and regulation work hand in hand. So, what were the main findings from the survey, and what can we expect looking forward?
Core findings from the survey
Before we look at the finer details, these are the core findings from the survey:-
· Demand continues across the Far East for what is a relatively young but high-growth ETF market.
· There is particular interest from Hong Kong with a preference for managing risk strategies, ESG and thematic strategies.
· Cross-border interest in ETFs continues growing, an essential fuel source for future market growth.
· Thematic ETFs focused on the Internet and technology are the most common investment topics at the moment.
· The vast majority of investors plan to increase, or at worst, maintain their ETF exposure in the short to medium term.
· There is growing interest in fixed-income ETFs, with 50% of investors planning to increase their allocation in this area.
While appreciative that investment trends can change relatively quickly, there appears to be strong momentum behind the growth in ETF trades. For many, it is the ability to pick and choose ETFs which are focused on indices, sectors or specific industries. This provides an invaluable source of diversification, managed funds, and the ability to trade ETFs as you would any typical share.
Further details from the survey
If we drill a little further down into the details of this survey, some exciting trends are emerging:-
Thematic ETFs
The use of thematic ETFs focused on individual sectors or investment strategies is showing tremendous growth. While there is growing demand for defensive income-related ETFs, thematic ETFs are becoming an essential element of managed risk strategies. Whether global interest rates have peaked is debatable, but many investors are looking to take advantage of recent interest rate rises. The fact that the ETF market is exceptionally liquid is a crucial factor which is often overlooked.
Smart beta ETFs
Smart beta ETFs, a blend of passive and active investment, are proving extremely popular with investors. They offer a data-driven approach to investment, creating a backbone of passive funds complemented by actively trading specialist funds. While experienced fund managers will dictate the overall strategy, cutting-edge technology is used to analyse vast amounts of data and identify passive and active funds for consideration.
Investment meetings
In a sign of the times, a surprising 76% of investors in the Far East prefer digital meetings, with 66% leaning towards receiving digital content and insights. While this has been a growing trend for some time, the recent Covid pandemic has opened the minds of many investors to what are more convenient and ultimately productive meetings.
While they will never match the overall benefits of face-to-face meetings, Zoom calls and similar services offer the chance to bring numerous parties together in one virtual meeting.
Summary
It is becoming evident that the Far East is a hotbed for ETFs and the huge range of investment strategies they bring to the market. While it was interesting to see a shift towards risk strategies and income ETFs, the topic of smart beta ETFs is grabbing more headlines. ETFs appear to be an ideal investment vehicle for a broad range of investment strategies.