Investors betting on global fixed income ETFs as assets reach historic milestone of $2 trillion

Investors more inclined to invest in an active strategy if packaged as an ETF rather than a mutual fund, says report

Investors betting on global fixed income ETFs as assets reach historic milestone of $2 trillion
Rony Abboud, chief marketing officer, Trackinsight

Investors are strategically expanding their allocations to diverse asset classes via ETFs, with a pronounced focus on equity and fixed income in 2023, says Trackinsight in its Global ETF Survey 2024 Report ‘50+ Charts of Worldwide ETF Trends.’ Interest in active management grew in North America while European investors continued to prioritize ESG investing.  

For the fourth consecutive year, North America witnessed net flows into fixed income ETFs surpassing $200 billion, driving the total assets in the region to exceed $1.5 trillion. In Europe, there were $66 billion in inflows, double the amount from the previous year, bringing the region's total assets closer to the half-trillion-dollar mark. In the Asia-Pacific region (APAC), interest surged significantly, resulting in increased flows compared to the previous year and expanding the total assets in that category. This resurgence across regions has contributed to global fixed income assets reaching a historic milestone of $2 trillion. 

Global investors also allocated more to active ETFs and would be more apt to purchase a strategy if it were converted from a mutual fund to ETF. The research shows more than 80 percent of investors would be more inclined to invest in an active strategy if packaged as an ETF rather than a mutual fund 

“North America is driving active management, and a lot of people think it will unlock a new chapter of ETF growth overall in the world,” says Rony Abboud, chief marketing officer with Trackinsight.  

ETF assets show sustained growth 

In 2023, total ETF assets surged to $11 trillion, highlighting a pattern of sustained growth, with ETF assets in Canada reaching $314 billion

In North America, active ETF strategies secured 25 percent of the flows in 2023, bringing total category’s assets in the region to $630 billion. In contrast, Europe, where interest is slowly growing, lags significantly with only $32 billion in assets, emphasizing investors' ongoing preference for passive strategies. In APAC, there was a substantial asset rebound compared to 2022; however, net flows have consistently declined since 2020. 

Global interest in thematic investing in 2023 continued to be subdued when compared to the levels seen during the pandemic years. AI, robotics, and automation themes took the global spotlight with $3.6 billion in inflows in the US and Europe, while the nuclear energy theme saw a surge in the US with $1 billion in new capital. Europe's commitment to Net Zero 2050 and Climate Change themes remained strong with over $10 billion in new inflows. 

Global interest in cryptocurrency ETPs (exchange-traded products) rejuvenated amid US Spot Bitcoin ETFs approval rumours, attracting over $1.5 billion in North America and more than $1 billion in Europe, marking the end of a dry crypto winter, says the report. Recently, the US overtook Europe and Canada in the crypto asset arena following a bulk approval and launch of Spot Bitcoin ETFs on US exchanges. Meanwhile, APAC had a minuscule presence in the crypto space, with only a handful of ETFs available in the market. 

Crypto ETFs seeing fastest growth 

“Cryptocurrency ETPs are seeing some of the fastest growth in terms of assets and flows, so crypto is here to stay and it's going to be a trend for the next decade,” says Abboud. “Analysts now recommend at least one to 2.5 percent allocation to Bitcoin ETFs. However, although crypto ETFs were trending in 2021 and almost received $100 billion in net inflows in 2021, interest rates and high inflation caused people to start dumping crypto and change those allocations to fixed income.” 

Europe reaffirmed its global leadership in the ESG market in 2023, injecting $50 billion into ESG ETFs. Europe now commands a remarkable 75 percent share of the global $550 billion ESG ETF assets, reaching an all-time high. In contrast, the US experienced a widening gap due to across-the-aisle pushback. In APAC, investors added over $1 billion to the ESG category, although notably lower than the previous two years. 

Abboud says Canadian investors are also diving into ESG-focused ETFs, with the research showing increased AUM year over year. This differs from US interest in the theme because they are more focused on returns, he said. Part of the growth in ESG is due to increased launches of ESG themed ETPs over the past three years. 

The fifth annual Trackinsight report, created in partnership with J.P. Morgan Asset Management and State Street, leverages Trackinsight's global database of over 10,000 ETPs and features insights from more than 500 investment professionals managing ETF assets exceeding $900 billion.