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ETF popularity continues to boom

ETF Investor research

Investors continue to flock to the ETF market with core portfolio allocations increasing with no expectations of a slow down in interest.

Investor interest in exchange-traded funds (ETF) has continued to climb, with new research forecasting the trend will continue over the next 12 months.

Investment Trends’ “2021 ETF Investor and Adviser Report” found the number of investors using the funds jumped 33 per cent to more than 1.7 million in 2021, with another 275,000 intending to begin using ETFs in the next 12 months.

“ETF adoption reached new highs in 2021 among both investors and advisers,” Investment Trends head of research Irene Guiamatsia said.

“Whether judicious or otherwise, retail investors tacitly associate passive investing with a cautious approach. The (ongoing) market turbulence certainly appears to have propelled a product that already had strong wind in its sails.”

The latest report further revealed the number of investors that had dedicated more than 25 per cent of their core portfolio to ETFs had increased to 27 per cent in 2021, compared to 16 per cent in 2020 and 4 per cent in 2019.

Investment Trends noted an interest in thematic ETFs and categories including renewable energy, artificial intelligence and global equities received higher interest from ETF investors than traditional asset class-based ETFs.

Guiamatsia said: “2021 was a significant inflection point that saw the concepts of ‘doing good’ and ‘doing well’ finally coalesce in investors’ minds, with ETFs seen as the vehicle of choice providing ease of access.”

Compared to five years ago, new retail ETF investors were younger and more commonly female. On average, 21 per cent of new ETF investors were female, aged between 18 and 34.

“Young women are on a mission to close the gender investing gap and determined to take charge of their financial future. They are eager to grow their knowledge and skills, highlighting education opportunities for issuers, financial advisers and investing platforms,” Guiamatsia noted.

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