The index providers’ report, Emerging Trends in Wealth Management, surveyed 220 wealth management professionals globally on the state and future direction of the industry.
This found over three-quarters of wealth managers (76 per cent) expect to increase their allocations to active exchange-traded funds (ETF) either “moderately” or “significantly” over the next three years.
MSCI noted these types of vehicles are “not typically” included in model portfolios used by wealth managers currently.
“Interest in active ETFs appears to be heating up because they combine the transparency and low transaction costs of the ETF structure but also allow for active bets in lieu of passive exposures,” it said.
“The active ETF market is an emerging yet rapidly expanding market segment, particularly in the US, where growth has been driven by mutual-fund conversions. Gaining visibility into these ETFs’ holdings and strategies, and educating clients about them, are important steps toward increasing allocations.”
Last month was a popular month for active ETF launches with Schroders, Macquarie Asset Management, PIMCO and Janus Henderson all launching active products.
There was also a growing interest in digital asset ETFs where 77 per cent expect to increase their allocations to active ETFs either “moderately” or “significantly” over the next three years.
This was most present in the Asia-Pacific region where the number stood at 91 per cent compared to 79 per cent in Europe, the Middle East and Africa and 61 per cent in the US, which MSCI attributed to the younger demographics in this market.
“This marked difference in interest for digital assets could be influenced by respondents’ clients’ average age. China, for example, has the second-largest millionaire population in the world after the US. The average age of its HNW population is much younger (the proportion of Chinese millionaires under 40 years old increased to 49 per cent in 2021) than the average age of a US millionaire at 61 in 2022.
“Consequently, wealth managers may sense an investment opportunity or are simply acknowledging a preference by their APAC clients to move more capital into the region as these markets grow in depth and breadth.”
Recent digital ETF launches include the Betashares Bitcoin ETF (QBTC) and Betashares Ethereum ETF (QETH) last month. According to the firm, QETH marks the first ASX-traded ETF to offer exposure to Ethereum, the “backbone of decentralised business applications and blockchain innovation”.
QBTC, which offers exposure to bitcoin, is the third such ETF to launch on the ASX, following launches by VanEck and Digital X last year.
