Exchange-traded funds had a “historic year” in 2019, according to a global investor survey from US private bank Brown Brothers Harriman (BBH).
The United States represents around 70% of the market, with AUM hitting $4.4trn (€4bn) as of December 2019.
The European market is also growing rapidly, surpassing $1trn; with a Money Monitor report from Lyxor ETF putting the market share of ETFs at 7.5% of all European domiciled investment funds.
Meanwhile, greater China is “poised for accelerated growth”, after capturing 4% of the market, the BBH report stated.
Both Lyxor and BBH flagged the strong uptick in fixed income ETFs.
In Europe, they gathered more assets than equity ETFs for the first time in three years.
Combined inflows into fixed income totalled €344bn, of which €288bn went into open-ended funds.
In contrast, equities had a mixed 2019, with combined inflows totalling just €38bn.
In the US, for the first time ever, fixed income ETFs attracted more new money than US equity ETFs.
Environmental, social and governance trackers across Europe gathered €16.6bn, according to Lyxor.
As with last year’s BBH survey, European investors “are sending a clear message: ESG is immensely important to their portfolio construction”, the private bank reported.
Nearly three-quarters (73%) of investors across Europe plan to increase their allocation to ESG investments.
The global trend is less rosy, however, with BBH reporting that the “stated enthusiasm for ESG strategies […] is somewhat at odds with what we see in the market”.
“ESG ETFs have captured just a fraction of total global ETF AUM, representing $52bn through November 2019.
“But as the adage goes: part performance is no guarantee of future results,” said BBH.
Over half (54%) of the 300 institutional investors, financial advisers and fund managers surveyed plan to increase allocations to ESG ETFs in 2020.
When asked which types of ETFs they would like to see more of in their local markets, the Europeans ranked ESG first.
This compares with active and managed risk/low volatility being joint top for the US, with greater China investors looking for more managed risk/low volatility ETFs.
The European ETF industry will have its 20th anniversary in April 2020 and some commentators are predicting growth in excess of $2trn by 2024.