Institutional investors plan to increase ETF allocations over the next year, according to data from Brown Brothers Harriman’s annual ETF survey. But in a crowded marketplace, buyers said they need to be more selective about which managers and products they choose.
Sixty-three percent of investors polled said they plan to increase the number of ETF managers they work with, down from 70 percent last year.
Tim Huver, a managing director on the ETF servicing team, said the growth of the sector and the number of products rapidly coming to market are a challenge to the due-diligence process. “Investors are slowly starting to be more selective in terms of those managers, and we will see even more selectivity in the year ahead,” he said.
Almost all respondents said that they intend to increase their investments in ETFs in the next year, with two-thirds saying they preferred active over passive ETFs.
“If you think about the Mag 7 and some of the concern with valuations coming into the year, and the overweight of some of those names within certain indices, investors are looking for an active manager to be able to navigate through that. It's not a wholesale exchange of passive for active, but maybe greater use of active-passive combinations within a portfolio,” said Huver.
Huver added that investor sentiment about ETFs remains buoyant, despite larger concerns about the economy and markets.
Almost all respondents said they would consider investing in private markets ETFs, but only 17 percent said that they would invest in a cryptocurrency ETF in the coming year.
