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Tracking Investor Appetite for Exchange-Traded Products

Data Science and Technology

By FactSet Insight  |  December 14, 2021

Thematic investing has caught fire. According to a 2021 survey from FactSet/Forbes Insights, more than nine out of 10 institutional investors from around the world say their firms are interested (55% very much so) in thematic investing.

“Thematic investing is becoming a very important segment for investors, and it’s one of the most unconstrained methods of investing,” says Jeremy Zhou, Head of Index Solutions at FactSet. “With thematic investing, you’re looking for opportunities created by long-term structural trends such as an aging population, for example, and finding exchange-traded products (ETPs), index funds, or related approaches that exhibit that specific theme. What makes this method different from other types of investing is you’re unconstrained by geography, sector, style, market cap size, or even asset class.”

It is indeed the era of thematic investment; of exchange-traded and structured indices that track a wide range of the markets at large. In February 2021, assets invested in thematic ETPs and exchanged-traded funds (ETFs) reached a record $394 billion, and in that same month, more than 50 new thematic ETFs/ETPs were launched globally.

Assets invested in thematic ETPs and ETFs reached a record $249 billion in February 2021.

To explore these trends and understand what investor appetite is—now and in the near future—for ETPs, including ETFs, exchange-traded notes (ETNs), and exchange-traded commodities (ETCs), FactSet and Forbes Insights surveyed 103 investment executives in North America (39%), Europe (26%), and the Asia-Pacific region (35%). Most respondents were from leading commercial banks (42%), insurance companies (19%), mutual funds (17%), hedge funds (15%), or foundations (4%) that had at least $250 million in assets under management.

The findings show that while thematic investment is already well established, demand is swelling. Ninety-five percent of survey respondents are interested in exploring innovative investment ideas, and over the next year and a half, respondents say their investment in thematic strategies will rise to 35% (from 28% today), with the majority focusing their attention on ETFs.

Though investors like what they’ve seen so far, they’re looking for more. More than eight in 10 would like to see a greater breadth of thematic investment opportunities (particularly around environmental, social, and governance (ESG) and sustainability), and survey respondents are actively seeking investment managers who are willing to collaboratively develop innovative, thematic investments.

More than eight in 10 investors would like to see a greater breadth of thematic investment opportunities, particularly around ESG and sustainability.

The opportunity for asset managers is real—and now. To help asset managers understand how the market is shifting and how they can better serve their clients, this report explores the current state and coming growth in thematic investing, which instruments and strategies investors are using to realize their objectives, and what asset managers should be doing to meet the needs of investors.

Read more in the eBook, Investors Are Hungry for Thematic Investments: It’s Time to Seize Opportunity and Build New Index Products.

Disclaimer: The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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