Institutions, FAs Bullish on ETFs — Evening Brief – 07.31.24
State Street Global Advisors, the asset management arm of State Street Corporation, recently published the findings of its 2024 ETF Impact Survey, which measures financial advisor, institutional, and individual investor sentiment toward exchange-traded funds (ETFs), as well as investor attitudes and opinions of the economy and ETFs. Among other findings, the survey discovered that institutional investors that utilize ETFs are more satisfied than non-users.
The survey revealed that 57% of institutional investors and 55% of financial advisors are bullish about the S&P 500’s performance in 2024. Individual investors are less confident, with 44% expecting the index to finish higher, 31% expecting S&P 500 returns to be unchanged, and 15% expecting it to finish worse.
However, 84% of respondents indicated that they were “decidedly more optimistic” about the long-term prospects of the future, up from 71% in the fourth quarter of 2022. Individual investors had a comparable level of confidence in their forecast for the country’s economic situation, with only 32% showing optimism for the economy in the coming year.
The top three reasons institutions utilize ETFs are diversification benefits, cost efficiency and cash/liquidity management at 65%, 60%, and 54%, respectively. When deciding between ETFs that provide the same or similar exposure, institutions prioritizing maximum liquidity was the most important at 66%, with best track record/performance close behind at 62%, and lowest total cost at 53%. Most institutional investors (60%) are optimistic about the outlook for the US economy and 41% are optimistic about the global economy. Meanwhile, the top three concerns among institutional investors include inflation, fluctuations in interest rates and geopolitical instability at 73%, 66%, and 65%, respectively.
In the financial advisory space, the top three reasons for recommending ETFs to clients include cost efficiency, diversification benefits and trading flexibility at 44%, 43%, and 43%, respectively. When deciding between ETFs with the same or similar exposure, advisors prioritize the best track record/performance, at 58%, lowest expense ratio, 54%, and most liquidity, 54%. More than three-quarters of advisors (77%) are optimistic about the future of the US economy, while 68% are optimistic about the global economy.
“The nuances in how and why institutions, advisors, and individuals are using ETFs speak to the many different investor benefits provided by the ETF wrapper,” Anna Paglia, chief business officer for State Street Global Advisors, said. “State Street Global Advisors will continue to innovate and evolve its ETF offerings to meet the changing demands of a wide variety of investor segments.”
The survey was conducted by research firms A2Bplanning and Prodege, surveying 576 global institutional investors involved in the decision-making of firms with at least $1 billion in assets under management. In the U.S, State Street polled 201 financial advisors, who advise on over $25 million in assets each, and 319 individual investors with assets of at least $250,000.