Local institutional investors are the second most likely in the world, at 78 per cent, to incorporate ETFs in their firm’s portfolio “extensively” or “frequently”, according to new data from State Street Global Advisors (SSGA).
Australia only trailed Japan (82 per cent) but led the Netherlands (71 per cent), Switzerland (67 per cent), Singapore (66 per cent), and the UK (64 per cent).
US investors were the least likely to use ETFs in their portfolios, though the majority (61 per cent) still did so extensively or frequently.
SSGA chief business officer Anna Paglia highlighted the growing confidence in ETFs as a core component of diversified portfolios among both institutional and individual investors.
“The rapid growth and lower cost of ETFs since their introduction over 30 years ago has made it easier for people from all walks of life to become investors,” Paglia said.
“With so many ETFs in the market, it’s understandable how difficult it can be for investors to choose funds that fit their goals and objectives.”
As such, SSGA Australia head of Investments Jonathan Shead said the appeal of ETFs differed markedly around the world.
Namely, Australian institutional investors prioritised performance and reputation when choosing between ETFs that offer the same or similar exposure, whereas cost was key for Swiss, Dutch, and Japanese investors.
US, UK, Swedish, and Singaporean investors, meanwhile, valued liquidity the most.
“Globally, institutions are leaning towards maintaining their allocations in bonds and cash, while they are split on whether to increase or maintain current allocations in equities and alternative investments,” Shead said.
“For this reason, 80 per cent of institutions are likely to consider actively managed ETFs in 2024, while only 4 per cent have ruled them out.”
SSGA’s latest data also examined each country’s outlook on domestic, US, and global economies.
Shead emphasised how continued geopolitical uncertainty, alongside growing tensions between the US and China in the South China Sea, were impacting individual and institutional investors in different, albeit significant, ways.
“Almost two-thirds of individual Australian investors were worried about geopolitical tensions sweeping the world, compared to only a third of institutional investors,” he said.
“The relative comfort institutional investors may have about global instability may explain why 50 per cent of Australian institutions are bullish about the domestic economy and the international outlook.”
Across the board, 58 per cent of local institutional investors were optimistic about the local economy, falling to 56 per cent for the global outlook and only 52 per cent for the US economy.
