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ETFs at “tipping point” of mass market allocation

ETF allocation to increaseAllocations to exchange-traded funds (ETFs) are on course to increase significantly over the next two to three years.

ETFs made up just over a fifth of client portfolios worldwide as recently as 2016. This figure is set to increase to 39% by 2022, said JP Morgan Asset Management (JPMAM).

Bryon Lake, JPMAM’s head of international ETFs, said: “We believe we’re at the tipping point of the mass market adoption of ETFs.”

Over 80% of global fund selectors surveyed said fees and costs were a main potential for ETF allocations, while 65% elected them for trading flexibility.

Speaking about fixed income, Lake said: “Investors cite they want simplicity, transparency and diversification which isn’t always possible when investing in global bond markets directly.”

The report – which canvassed 240 professional buyers with $14 trillion in assets under management – found notable regional differences when it came to ETF allocations.

In the US, ETFs already make up over 40% of client portfolios. This figure is expected to rise to 54% over the next two to three years.

Latin America was also found to be way ahead of Europe and Asia Pacific in terms of ETF usage.

ETFs currently make up 35% of portfolio allocation in Latin America, compared to 25% in Europe, Middle East and Africa, and 23% in Asia Pacific.

By 2022, these figures are set to increase to 43%, 34%, and 33% respectively.

According to a recent report by fund giant BlackRock, exchange-traded products saw record outflows of $7 billion (€6.3 billion) over August. 

The outflows were exclusively out of equity products, which had $13 billion in redemptions – another record, and which compares to a previous record of $5.4 billion in April 2012.

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