Investors to Increase Use of ETFs in Next Year - Markets Media (2024)

FAQs

Investors to Increase Use of ETFs in Next Year - Markets Media? ›

As the ETF industry reaches a milestone of $12.71 trillion in global assets, the Brown Brothers Harriman

ETFs are increasingly gaining share of all funds volume across the US and Europe, with growth at 16% per annum (p.a.) over the period 2016-2022.

HOW DO ETFs IMPACT MARKET LIQUIDITY? ETFs are unique; they provide exposure to a diversified collection of assets, like a mutual fund, but trade on exchange, like a stock. This structure makes the liquidity of ETFs unique, too. Liquidity refers to the ease of buying or selling a security.

This financial technology affords a rich diversity of investment exposures at low cost, along with transparency and liquidity. On the shoulders of past growth, we think there is tremendous future potential, with global ETF assets poised to reach US$14 trillion by the end of 2024¹.

Growth Projections: Capitalising on global demand

Global ETF AuM is expected to exceed $19.2 trillion by June 2028. This would represent a five-year CAGR of 13.5%, more than double the anticipated 5% CAGR for the AWM industry as a whole in the five years up to 2027.

ETFs are considered to be low-risk investments because they are low-cost and hold a basket of stocks or other securities, increasing diversification. For most individual investors, ETFs represent an ideal type of asset with which to build a diversified portfolio.

Most ETFs have lower fees than mutual funds, as well as lower operating expense ratios. And rather than pay the commision for buying and selling all the securities within an ETF, one single price tag is all you'll be faced with.

Market risk

The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.

Increased demand for the ETF's shares should raise its price, and any sales of the underlying securities should lower their prices, narrowing the gap between the ETF and its underlying value.

ETFs can offer lower operating costs than traditional open-end funds, flexible trading, greater transparency, and better tax efficiency in taxable accounts.

What is the future outlook for ETF? ›

Growth projections: From strength to strength

Over half of the respondents we surveyed believe that global ETF assets under management (AuM) will reach at least USD 18tn by 2026 - representing a 14.6% CAGR between June 2021 and June 2026.

If the market falls, a passively managed ETF will generally follow it down. You can find actively managed ETFs, in which fund managers actively buy and sell securities in the hope of beating an index benchmark (though most aren't able to do so consistently).

Holding an ETF for longer than a year may get you a more favorable capital gains tax rate when you sell your investment.

Demand for Active ETFs Continues to Rise: A majority of ETF investors (78%) predict an increase in their overall portfolio exposure to active ETFs in the next 12 months and 80% of ETF investors have purchased at least one active ETF in the past 12 months.

The rapid growth of active ETFs can be attributed to several factors: The U.S. Securities and Exchange Commission passed the “ETF Rule” in 2019, streamlining the ETF listing process and giving portfolio managers more flexibility when creating and redeeming ETF shares; investors and their advisors have increasingly ...

In the 2000s, there was a vast expansion of ETFs into new asset classes and strategies, transforming them from a niche product into a fundamental tool for both retail and institutional investors. The decade began with ETFs primarily focused on broad market indexes.

ETF MARKET SIZE

ETFs represent 13% of equity assets in the U.S., 8.8% in Europe, and 4.6% in Asia-Pacific. Market share is smaller in fixed income, where ETFs account for 2.8% of fixed income assets in the U.S., 1.9% in Europe, and 0.4% in Asia-Pacific (Figures 1, 2, and 3).