Global ETF Study 2020 - J.P. Morgan · AND SMART BETA ETFS • The respondents to the study are increasing their use of active and smart beta ETFs. In two to three years’ time,

GlobalETF Study

2020

2 | GLOBAL ETF STUDY 2020

AGENDA

EXECUTIVE SUMMARY

1 ETF Market Growth: The Rising Role of active

and smart beta ETFs and ESG – 5-22

2 ETF Benefits and Risks – 23-32

3 Active ETFs – 33-48

4 Fixed Income ETFs – 49-56

5 Brand Awareness – 56-63

J.P. MORGAN ASSET MANAGEMENT | 3

EXECUTIVE SUMMARY: MOVING TO ETFS AS TOOLS TO SOLVE SPECIFIC PROBLEMS

THE TREND TO ACTIVE AND SMART BETA ETFS AND ESG

ETFs are increasingly used for active and smart beta investing, in addition to passive investing. By 2023, respondents expect around 40% of ETF allocation in their client portfolios to be in active or smart beta ETFs. ESG and thematic ETFs are key growth areas, with active ETFs seen by larger investors in particular as suitable for ESG investing.

LOW COST AND LIQUIDITY THE BIGGEST BENEFITS

Low cost investment is the most important benefit of ETFs, followed by ease of trading/liquidity. For respondents with a lower AUM, diversification and risk management are important benefits. However, liquidity in a bear market is seen as one of the biggest risks of ETFs, followed by market distortion.

ACTIVE ETFS ARE USED FOR SPECIFIC AIMS

Those with higher AUMs are more likely to see active ETFs as a tool to add alpha, but otherwise active ETFs are seen as most suitable for targeted investing and achieving specific aims, such as ESG. Track record is the most important factor when selecting an active ETF provider, followed by investment philosophy and trading expertise.

COST AND CONTROL KEY TO FIXED INCOME ETFS

Reducing cost and adding control are seen as key benefit of fixed income ETFs, as well as simplifying bond exposures. Increasing the product range is seen as key to expanding the use of fixed income ETFs, as this would give exposure to sectors of interest, such as corporate, high yield and emerging market debt.


SAMPLE BREAKDOWN

EMEA120

United States120

AsiaPacific

40

LatinAmerica

40

Global320

77%User

23%Non-user

0

5

10

15

20

25

24%

Independent Wealth / Asset Manager

Discretionary Fund Manager

Independent Advisor / Broker Private Bank /

Bank trust

Investement Platform Provider for DC Plan

Insurance CompanyFund of Funds

23% 21%17%

6%6%3%

Less thanUSD 500m

USD 500mto less than

USD 1bn

USD 1bnto less than

USD 5bn

USD 5bnto less thanUSD 20bn



USD 250bnor more

Total AUM USD 12.9 trillionAverage AUM USD 40.3 billion


1. ETF Market Growth: The Rising Role of active and smart beta ETFs and ESG


INVESTORS CONTINUE TO MAKE MORE USE OF ACTIVE

AND SMART BETA ETFS

• The respondents to the study are increasing their use of active and smart beta ETFs. In two to three years’ time, the respondents expect active and smart beta ETFs to each take around one-fifth of their clients’ portfolios.

• While the use of active and smart beta ETFs is rising, these styles are still mainly within the equity and fixed income asset classes according to the results.


12% 16% 21%

8% 15% 18%

80% 69% 61%

3 years ago Today Next 2–3 years

3 years ago Today Next 2–3 years

Passive ETFs

Active ETFs

Smart Beta

66%

23%

6%

4%

2%

63%

24%

7%

4%

3%

62%

23%

8%

4%

3%

Equity ETFs

Fixed Income ETFs

Alternatives ETFs

Multi-Asset ETFs

Other ETFs

Activ

e v

Pass

ive

Asse

t cla

ss

Q1. Approximately what percentage of your clients’ overall portfolio is allocated to the following? Has this changed over the last 3 years and how do you expect it to change over the next 2-3 years?


ACTIVE ETFS SET TO BECOME OVER A QUARTER OF PORTFOLIOS IN THE US

• The biggest move away from passive ETFs to active ETFs is reported by respondents from Latin American, followed by the US and then EMEA.

• Respondents in the EMEA region are the most diversified among different asset classes by region. Asset allocation is also relatively stable over time by region, reinforcing that ETF diversification is predominantly by ETF style, ahead of the underlying asset classes used.


United States EMEA

Passive ETFs 82% 76%

Active ETFs 2% 3%

Smart Beta

Equity ETFs

Multi-Asset ETFs

Fixed Income ETFs

Other ETFs

Alternatives ETFs

16% 21%

71%

4%

25%

3 years ago Next 2–3 yearsToday


86%

4% 6%

10% 15%

69%

16%

15%


78% 62%

14% 19%

8% 19%

55%

26%

19%


80% 72%

14% 18%

6% 11%

64%

21%

15%


90%

8%

2%

1%

0%

85%

7%

6%

3%

0%

81%

8%

8%

3%

0%


64%

30%

3%

2%

1%

66%

26%

4%

2%

1%

65%

28%

3%

2%

1%


70%

21%

5%

3%

1%

68%

23%

4%

2%

3%

65%

23%

6%

3%

3%


56%

27%

8%

6%

3%

52%

28%

9%

5%

4%

54%

26%

11%

5%

5%

Asia Pacific Latin America

Q1. Approximately what percentage of your clients’ overall portfolio is allocated to the following? Has this changed over the last 3 years and how do you expect it to change over the next 2-3 years?


GROWTH EXPECTATIONS VARY REGIONALLY WITH ACTIVE ETFS AHEAD IN THE AMERICAS

• Overall, investors expect to see higher growth rates for active and smart beta ETFs than for passive ETFs but growth expectations vary widely by region.

• Investors in Latin America and the US predict the strongest growth for active ETFs. In contrast, smart beta and passive ETFs are expected to grow more than active ETFs in the EMEA and, in particular, the Asia Pacific region.


Q3. What level of growth do you think each of the following ETF classes will experience over the next 2-3 years? Please rate on a scale of 0-5 where 0 = No growth at all and 5 = Strong growth

% Strong Growth (4+5)

Passive ETFs

Active ETFs

Smart Beta

37%

38%

32%

Global

25%

53%

48%

Asia Pacific

35%

15%

15%

Latin America

50%

43%

33%

United States

28%

34%

32%

EMEA


ESG AND THEMATIC ETFS SEEN AS KEY GROWTH AREAS IN THE NEAR FUTURE

• Investors outside the US expect higher growth from ESG and thematic ETFs in the next 2-3 years, compared to smart beta and active ETFs.

• In the US, investors expect higher growth with active equity and equity smart beta, rather than thematic ETFs, although ESG ETFs are also expected to grow, albeit at a lower rate than in other regions.


Global

59%

42%

34%

33%

30%

24%

20%

16%

7%

7%

7%

5%

ESG ETFs

Thematic ETFs

Active Equity ETFs

Equity Smart ETFs

Active Fixed Income ETFs

Active Alternatives ETFs

Alternatives Smart ETFs

Fixed Income Smart ETFs

ETF of ETFs

Inverse ETFs

Leveraged ETFs

Leveraged Inverse ETFs

Latin America

68%

55%

33%

15%

50%

28%

28%

18%

5%

0%

3%

0%

Asia Pacific

70%

45%

38%

25%

23%

8%

10%

15%

8%

10%

5%

10%

TOP

3

EMEA

72%

52%

25%

35%

22%

25%

25%

13%

4%

7%

6%

4%

United States

41%

27%

43%

38%

35%

26%

17%

18%

11%

9%

9%

7%




HOW GROWTH EXPECTATIONS FOR ETFS VARY BY ASSETS UNDER MANAGEMENT

• The bigger the respondent’s assets under management (AUM), the more likely they are to expect strong growth for three types of ETF in the next few years: ESG ETFs, thematic ETFs and active alternatives ETFs.


Smart Beta

Active ETFs

Passive ETFs

ESG ETFs

Thematic ETFs

Active Equity ETFs

Equity Smart Beta

Active Fixed Income ETFs

Active Alternatives ETFs

Alternatives Smart Beta

Fixed Income Smart Beta

ETF of ETFs

Inverse ETFs

Leveraged ETFs

38%

37%

32%

59%

42%

34%

33%

30%

24%

20%

16%

7%

7%

7%

5%Leveraged inverse ETFs

Global

42%

37%

27%

46%

26%

30%

35%

26%

19%

19%

10%

5%

10%

4%

10%

Less than $1 billion

32%

38%

38%

57%

38%

40%

24%

33%

22%

17%

11%

7%

3%

6%

1%

$1 billion to $20 billion

40%

36%

29%

72%

58%

30%

41%

30%

29%

25%

25%

9%

10%

9%

7%

$20 billion or more




HOW VIEWS ON KEY GROWTH FACTORS FOR ETFS VARY BY REGION

• Rising demand for ESG is particularly powerful for ETF growth in the EMEA and Asia Pacific regions. Access to new market segments is another key growth factor, especially in Asia Pacific and the US, while tech developments are seen as the biggest growth factor in Latin America.

• For non-ETF investors, ESG investing and tech developments are seen as the strongest factors for ETF growth.


Rising demand for sustainable/socially responsible/ESG investing

Increasing accessibility of ETFsto new segments of financial markets

Technological developments (AI, machine learning, data analytics etc.)

The proliferation of a multitudeof ETF products and strategies

The role of regulation in openingthe ETF market to new groups of investors

Education and understanding of ETF

Asia Pacific

50%

55%

28%

45%

15%

8%

Global

51%

47%

38%

37%

34%

33%

User

50%

52%

35%

36%

32%

31%

Non-user

53%

32%

48%

41%

40%

37%

Latin America

35%

48%

60%

45%

45%

48%

United States

45%

49%

32%

35%

36%

37%

EMEA

63%

43%

41%

33%

35%

31%

TOP

3

Q4. How much do you think each of the following factors are impacting the growth of the ETFs market? Please rate on a scale of 0-5 where 0 = Not impactful at all and 5 = Very impactful

% Impactful (4+5)


INVESTORS EXPECT TO SEE A PORTFOLIO TILT TOWARDS GLOBAL AND EMERGING MARKETS

• In terms of regional asset allocation, allocations to the US are expected to fall slightly, with higher allocations to emerging markets and China.

• EMEA portfolios have the most diversified allocations, followed by Asia Pacific, with portfolios in the Americas, having a significantly higher US weighting.


Emerging markets

China

United States

Developed Europe

Global markets

Other developed markets

Emerging markets

China

United States

Developed Europe

Global markets

Other developedmarkets

Today Next 2-3 years

Next 2-3years

Next 2-3years

Next 2-3years

LATIN AMERICAUNITED STATESEMEA

11

5

51

6

55

1315

12

14

6

12

3

6812

10

5

66

102 2

3 2

6

Next 2-3years

ASIA PACIFIC

467

9

16

9

14

516

108

7

18

TodayToday

6511

9

33

4

970

97

91

Today

34

18

83

19

4

37

20

23

18 134

Today

14

GLO

BAL

%RE

GIO

N %

Q2. And approximately what percentage of your clients’ ETF portfolio is allocated to the following markets? And how do you expect it to change over the next 2-3 years?


2. ETF Benefits and Risks


FOR MOST, LOW INVESTMENT COSTS AND LIQUIDITY ARE THE KEY ETF ATTRIBUTES

• While low investment cost is given as the top ETF attribute by all regions and both ETF investors and non-ETF investors, the rating of other attributes varies.

• Liquidity is the next key attribute, apart from in the EMEA where simplicity and flexibility matter more. Diversification and risk management are important attributes in LatAM and the US and also among non-ETF investors.


Q7. What do you see as the most important attributes of ETF products and strategies?

Non-userUserGlobal

Low investment costs 60% 58% 64%

Ease of trading/Liquidity 43% 40% 51%

Simplicity 34% 38% 23%

Diversificationand risk management 33% 32% 36%

Flexible building blocksfor client portfolios 28% 30% 23%

Transparency 24% 21% 33%

Tax benefits 23% 28% 8%

Accessibility 17% 17% 17%

Ease of researchand understanding 8% 10% 3%

EMEA

57%

34%

43%

28%

35%

20%

20%

29%

8%

United States

61%

39%

31%

35%

27%

28%

32%

8%

13%

Latin America

53%

68%

33%

48%

20%

18%

10%

13%

0%

Asia Pacific

73%

53%

23%

28%

20%

33%

20%

10%

5%

TOP

3TO

P 3

% Multiple answers allowed


LARGER INVESTORS MORE LIKELY TO PRIORITISE LOW COST AS AN ETF ATTRIBUTE

• The largest investors place more emphasis on low investment costs, ahead of other ETF attributes, although ease of trading and simplicity also matter to them.

• Investors with less than $1bn AUM are more likely to use ETFs for diversification and risk management and simplicity is less important to them.


Low investment costs

Ease of trading/Liquidity

Diversificationand risk management

Flexible building blocksfor client portfolios

Simplicity

Transparency

Tax benefits

Accessibility

Ease of researchand understanding

Other

60%

43%

34%

33%

28%

24%

23%

17%

8%

1% 1% 0% 2%

55%

45%

19%

47%

18%

47%

35%

26%

13%

14%

58%

41%

40%

30%

18%

18%

37%

22%

19%

2%

65%

43%

38%

27%

24%

25%

23%

18%

11%

Global Less than $1 billion $1 billion to $20 billion $20 billion or more

Q5. What do you see as the most important attributes of ETF products and strategies?



LIQUIDITY IN A MAJOR BEAR MARKET IS SEEN AS THE BIGGEST ETF RISK

• Just as liquidity is seen as a key attribute, it is also a source of risk for ETFs, particularly by non-ETF investors. Market distortion is the next biggest obstacle or risk overall. Tax, tracking error, regulation and trading costs also crop up as significant risks in different regions.


Liquidity issues undermajor bear market

Market distortion

Tracking error

Regulation restrictions

Market fragmentation

Taxation issues

Trading costs

Non-userUserGlobal

58%

46%

36%

34%

33%

26%

26%

54%

47%

35%

33%

32%

29%

27%

72%

43%

40%

39%

33%

17%

20%

EMEA

59%

42%

30%

36%

36%

27%

37%

United States

56%

48%

45%

32%

36%

23%

16%

Latin America

65%

55%

30%

38%

25%

13%

15%

Asia Pacific

53%

40%

33%

35%

20%

50%

33%

Q6. And what do you see as the biggest obstacles/risks of investing in ETFs?



LIQUIDITY AND MARKET DISTORTION REMAIN AS THE TOP TWO RISKS

• Comparing data from last year’s Global ETF Study 2019 to 2020, giving insights to the factors affecting investing in ETFs.

• Liquidity remains the biggest potential risk for ETF investing, followed by market distortion with a narrower gap between them.

• Tracking error and other issues have overtaken taxation issues as a risk with ETF investing.


Q6. And what do you see as the biggest obstacles/risks of investing in ETFs? (2020, Multiple answers allowed)

2019 Q. What do you see as the biggest threats/risks of investing in ETFs? (2019, Multiple answers allowed)

2019, Multiple answers allowed2020, Multiple answers allowed


Market distortion

Tracking error



Taxation issues

Trading costs

Global – 2020

58%

46%

36%

34%

33%

26%

26%


Market distortion

Taxation issues



Global – 2019

67%

39%

23%

17%

15%


Market distortion

Tracking error



Taxation issues

Trading costs

Global – 2020

58%

46%

36%

34%

33%

26%

26%


Market distortion

Taxation issues



Global – 2019

67%

39%

23%

17%

15%


3. Active ETFs


ACTIVE ETFS ARE SEEN AS ADDING MORE TARGETED OR SPECIFIC GOALS TO ETF USE

• Active ETFs are seen as most suitable for specific investment criteria or outcomes, ahead of other strategies. This enables investors to combine ETF advantages with specific goals, such as ESG investing. Adding alpha is cited by respondents in Asia Pacific.


Gaining exposure to specificinvestment criteria

(e.g. ESG)

Targeting specific investmentoutcomes/objectives

Optimizing tacticalallocation at di�erent times

Increasing portfoliodiversification

Adding alpha to the portfolio

Building out the strategic coreof the portfolio

Mitigating the limitationsof market-cap weighted indexing

Risk management strategies

Global

58%

51%

42%

37%

37%

30%

24%

21%

Global Asia Pacific

48%

60%

15%

18%

58%

33%

38%

33%

Latin America

75%

45%

63%

23%

38%

33%

25%

0%

Non-user

51%

45%

47%

34%

36%

29%

22%

37%

User

60%

53%

41%

38%

38%

30%

25%

16%

EMEA

60%

45%

43%

42%

31%

25%

27%

28%

United States

53%

56%

44%

45%

37%

30%

15%

21%

TOP

3

Q7. Which of the following strategies would you say Active ETFs are most suitable for? Please rank 3 options in order of importance

% Rank 1 + Rank 2 + Rank 3


THREE WAYS THAT INVESTOR AUM AFFECTS THEIR VIEWS ON USING ACTIVE ETFS

• Three findings related to investor AUM: larger investors are more likely to see active ETFs as suitable for ESG and adding alpha to portfolios, while smaller investors are more likely to see active ETFs as good tools to increase portfolio diversification.


Q7. Which of the following strategies would you say Active ETFs are most suitable for? Please rank 3 options in order of importance


Gaining exposure to specificinvestment criteria (e.g. ESG)

Targeting specific investmentoutcomes/objectives

Optimizing tactical allocationat di�erent times

Building out the strategiccore of the portfolio

Adding alpha to the portfolio

Increasing portfolio diversification

Mitigating the limitationsof market-cap weighted indexing

Risk management strategies

58%

51%

42%

37%

37%

30%

24%

21%

44%

55%

41%

44%

29%

26%

36%

26%

59%

50%

45%

42%

39%

32%

15%

19%

66%

49%

41%

28%

40%

29%

26%

21%

Global Less than $1 billion $1 billion to $20 billion $20 billion or more


TRACK RECORD IS THE TOP DRIVER WHEN CHOOSING AN ACTIVE ETF PROVIDER

• ETF performance is largely seen as the most important driver in the choice of an active ETF provider by 81% of respondents globally. Investment philosophy is seen as a particularly important driver in the US (69%). Trading expertise is highly appealing in all regions (56% overall), but especially Latin America (68%).


Q8. What do you think are the most important drivers when choosing an Active ETFs provider? Please rank 3 options in order of importance


Brand

Market share

Client support

ESG approach

Track record

Investment philosophy

Trading expertise (dedicatedteam, high-tech platform etc.)

Global

30

29

25

21

81

57

56

User

35

29

22

21

81

59

53

Non-user

14

32

36

22

84

49

63

Asia Pacific

25

22

19

59

78

44

53

Latin America

20

58

28

8

80

40

68

United States

39

25

26

10

79

69

51

EMEA

25

26

25

27

85

53

57


TOP DRIVERS WHEN CHOOSING AN ACTIVE ETF PROVIDER BY DIFFERENT TYPES OF INVESTOR

• Investment philosophy is particularly important in active ETF selection for insurers and independent adviser/brokers, while trading expertise stands out for fund-of-funds and Discretionary Fund Managers. Market share and brand are more important for private banks and bank trusts than other organisations.


Q8. What do you think are the most important drivers when choosing an Active ETFs provider? Please rank 3 options in order of importance


Track record

Investment philosophy

Trading expertise (dedicated team,high-tech platform etc.)

Client support

Market share

Brand

ESG approach

Other

Global Fund of Funds Private Bank/Bank Trust

DiscretionaryFund Manager

InsuranceCompany

IndependentWealth/

Asset Manager

InvestmentPlatform Provider

for DC plan

IndependentAdvisor/Broker

81%

57%

56%

30%

29%

25%

21%

1%

82%

36%

73%

18%

36%

18%

36%

0%

82%

45%

74%

14%

23%

26%

33%

3%

84%

57%

44%

38%

30%

27%

20%

0%

79%

79%

53%

26%

5%

37%

21%

0%

100%

56%

56%

22%

22%

11%

33%

0%

82%

77%

64%

26%

21%

21%

9%

0%

73%

42%

35%

51%

55%

24%

18%

4%


WHILE COST IS CRITICAL , OTHER FACTORS PLAY A ROLE IN ACTIVE ETF PRODUCT SELECTION

• The vast majority of respondents globally (73%) identify the full cost of investing as the top driver when choosing an active ETF product. More than half (59%) also point to the ETF structure (59%) and ETF trading liquidity (57%).

• One interesting regional variation is that brand and ESG score are relatively much more important to the Asia Pacific region (and also to non-ETF investors).


Q9. What do you think are the most important drivers when choosing an Active ETFs product? Please rank 3 options in order of importance


Full cost of investing (total expense ratio,transaction costs, taxes etc.)

ETF structure (underlying securities,asset classes, etc.)

ETF trading liquidity

Track record

Tracking error

Brand

ESG score

Other

73%

59%

57%

52%

23%

22%

13%

1%

GlobalGlobal

0%

78%

33%

38%

48%

13%

45%

48%

0%

Asia Pacific

0%

75%

63%

75%

55%

13%

20%

0%

0%

Latin America

0%

75%

57%

53%

38%

22%

28%

26%

0%

Non-user

1%

73%

60%

58%

56%

23%

20%

10%

1%

User

1%

77%

67%

54%

49%

20%

18%

15%

1%

EMEA

1%

68%

59%

62%

56%

32%

18%

5%

1%

United States


TOP DRIVERS WHEN CHOOSING AN ACTIVE ETF PRODUCT FOR DIFFERENT INVESTOR TYPES

• Unlike every other organisation, independent advisers/brokers do not put full cost first here, but see liquidity, track record and structure as more important when choosing an active ETF product.


Q9. What do you think are the most important drivers when choosing an Active ETF product? Please rank 3 options in order of importance


ETF structure (underlying securities,asset classes, etc.)

ETF trading liquidity

Track record

Tracking error

Brand

ESG score

Full cost of investing (total expenseratio, transaction costs, taxes etc.)

73%

59%

57%

52%

23%

22%

13%

90%

47%

37%

74%

21%

26%

5%

65%

69%

64%

55%

26%

20%

0%

79%

68%

53%

48%

21%

11%

21%

100%

33%

33%

56%

11%

33%

33%

56%

61%

67%

65%

27%

14%

9%

78%

52%

69%

32%

22%

22%

26%

81%

61%

43%

55%

20%

30%

12%

Global Fund of Funds Private Bank/Bank Trust

DiscretionaryFund Manager

InsuranceCompany

IndependentWealth/

Asset Manager

InvestmentPlatform Provider

for DC plan

IndependentAdvisor/Broker


SIZE MATTERS MOST WHEN INVESTORS LOOK AT AN ETF’S UNDERLYING INDEX

• Three-quarters of global respondents say size/market cap is the most important driver when looking at an ETF’s underlying index. This is particularly true among LatAm and US respondents (85% and 80%).

• Notable regional differences include greater emphasis on popularity/recognition among Asia Pacific respondents and less emphasis on track record by LatAm PBs.


Q10. What do you think are the most important drivers when looking at the underlying index of an ETF? Please rank 3 options in order of importance


Non-userUserGlobal

Size/Market cap

Weighting method

Track record

Popularity/Recognition

ESG criteria

Age

Asia Pacific

50%

53%

63%

75%

35%

25%

Latin America

85%

90%

25%

63%

0%

38%

United States

80%

81%

69%

41%

13%

16%

EMEA

75%

51%

65%

61%

31%

16%

75%

67%

61%

55%

21%

20%

74%

68%

61%

60%

20%

18%

79%

63%

64%

41%

25%

28%


4. Fixed Income ETFs


FIXED INCOME ETFS CAN HELP INVESTORS REDUCE COSTS AND CONTROL BOND EXPOSURE

• While fixed income ETFs are widely seen as reducing fixed income investing costs (54%), simplifying, adjusting and tactical exposure are also important for investors.

• US and Asia Pacific investors are more likely to mention portfolio risk rebalancing than the other regions, while access to specific sectors is important for EMEA investors.


Reducing the cost of fixedincome investing

Tactical exposure and adjustments

Simplifying their bond exposure

Cash and liquidity management

Gaining access to specificsectors/markets

Portfolio risk rebalancing

Core long-term investment holdings

Trading tool

Hedging

54%

42%

41%

40%

39%

35%

24%

13%

12%

Global

34%

66%

68%

37%

21%

45%

13%

0%

16%

Asia Pacific

58%

25%

15%

75%

58%

28%

0%

15%

28%

Latin America

51%

26%

46%

37%

31%

48%

43%

10%

7%

United States

62%

56%

37%

32%

47%

20%

15%

20%

10%

EMEA

57%

42%

43%

38%

44%

29%

26%

12%

8%

User

42%

41%

37%

46%

23%

54%

17%

17%

24%

Non-user

Q13. Which of the following would you say fixed income ETFs are most suitable for? Please rank 5 options in order of importance



FIXED INCOME ETF GROWTH TO BE SPURRED BY MORE PRODUCTS AND COST EFFICIENCY

• In the US, expanding the product range is the biggest factor for market growth by some way, with other factors much more bunched together.

• Adding active management to fixed income ETFs is seen as boosting market growth most in Latin America, while cost efficiency matters most in Asia Pacific, the EMEA region and also with non-ETF investors.


Q14. What do you think will help spur further market growth of fixed income ETFs? Please rank 3 options in order of importance


Expanding range of ETF products(duration, diversification,

hedging etc.)

Increasing cost-e�ciency

More granular accessibility todiverse segments of the bond market

More accurate replication(minimising tracking error)

More customised/specialisedproducts and strategies

Improving application of activemanagement to fixed income ETFs

Other

Global

69%

62%

48%

43%

41%

37%

1%

Latin America

68%

59%

18%

82%

71%

3%

0%

Asia Pacific

53%

79%

61%

45%

24%

39%

0%

United States

79%

49%

48%

47%

35%

39%

2%

EMEA

65%

69%

51%

26%

44%

44%

1%

Non-user

60%

71%

41%

49%

43%

34%

1%

User

72%

59%

50%

41%

41%

38%

1%


CREDIT AND EM DEBT SEEN AS ATTRACTIVE SECTORS FOR FIXED INCOME ETFS

• Generally, credit (corporate and high yield bonds) and emerging market bonds are seen as the most attractive sectors in the next 2-3 years, ahead of ESG bonds and other sectors. However, this varies by region with much less interest in ESG/green bonds in the US, for example.


Global User Non-user

Corporate bonds

High yield bonds

Emerging market bonds

ESG/Green bonds

Ultra-short bonds

Government bonds

Convertible bonds

Municipal bonds

Mortgage related

Other

46%

42%

42%

38%

28%

30%

27%

24%

23%

0%

45%

46%

41%

38%

27%

28%

25%

27%

23%

0%

49%

28%

44%

39%

31%

38%

34%

15%

21%

0%

Latin America

53%

33%

50%

48%

25%

28%

33%

13%

20%

0%

Asia Pacific

32%

40%

37%

63%

58%

18%

8%

16%

29%

0%T

EMEA

51%

49%

39%

40%

20%

35%

36%

17%

13%

0%

United States

44%

40%

42%

24%

28%

29%

23%

38%

32%

1%

Q15. When considering investing in fixed income ETFs, which of the following sectors look most attractive to you over the next 2-3 years? Please rank 5 options in order of importance



5 . Brand Awareness


THE BIG TWO ETF PROVIDERS FACE CHALLENGERS IN FIXED INCOME AND OTHER AREAS

• J.P. Morgan Asset Management looks to be in a good position to challenge the big two ETF providers (Blackrock iShares and Vanguard) in active ETFs and is in consideration for various other types of ETFs. A wide range of ETF providers are under consideration for fixed income, smart beta and thematic ETFs.


Equity ETFs

1 Vanguard

2 BlackRock

3 State Street

4 Fidelity

5 JP Morgan

5Active ETFs

1 BlackRock

2 Vanguard

3 JP Morgan

3 Fixed-incomeETFs

1 BlackRock

2 Vanguard

3 State Street

4 Amundi

5 Invesco

7 UBS

8 JP Morgan

6 Prudential Investment Management (PGIM)

8Smart Beta

1 BlackRock

2 Vanguard

3 Invesco

4 State Street

5 Wisdom Tree Investments

6 Goldman Sachs

7 JP Morgan

7ESG ETFs

1 BlackRock

2 Vanguard

3 State Street

4 UBS

5 Invesco

6 JP Morgan

6 ThematicETFs

4 Invesco

5 Amundi

6 Vanguard

7 State Street

8 JP Morgan

1 BlackRock

2 UBS

3 Wisdom Tree Investments

8Ultra-shortETFs

4 State Street

5 Invesco

6 JP Morgan

1 BlackRock

2 Vanguard

3 Goldman Sachs

6ETFs ofETFs

1 BlackRock

2 Vanguard

3 State Street

4 Fidelity

5 JP Morgan

5

Provider Attribute

JP Morgan rank

37%

25%

19%

16%

13% 19%

17%

15%

32%

27%

21%

46%

33%

25%

25%

24%

21%

40%

33%

29%

66%

63%

47%

40%

36% 23%

22%

21%

21%

20%

35%

23%

23%

45%

33%

29%

25%

24%

22%

21%

57%

47%

36%

33%

27%

26%

26%

25%

Q16. Which of the following ETF providers are you, or would you, consider investing with for each of the following ETF types?

Multiple answers allowed


INVESTORS SEE J.P. MORGAN ASSET MANAGEMENT AS STRONG ON TECHNOLOGICAL DEVELOPMENT AMONG PROVIDERS

• No doubt familiarity with the top two ETF providers is a factor in how they do well for various attributes, and they score highly in absolute terms on some attributes, such as Vanguard on value for money.

• J.P. Morgan Asset Management is picked for technological development ahead of all but BlackRock.


Technologicaldevelopment

1 BlackRock

2 Vanguard

3 Fidelity

4 State Street

5 JP Morgan

1 BlackRock

2 Vanguard

3 State Street

4 Fidelity

5 JP Morgan

1 BlackRock

2 JP Morgan

1 BlackRock

2 Vanguard

3 State Street

4 UBS

5 JP Morgan

1 Vanguard

2 BlackRock

3 State Street

4 Fidelity

5 Invesco

6 UBS

7 JP Morgan

1 BlackRock

2 Vanguard

3 Amundi

4 State Street

5 UBS

6 Invesco

7 JP Morgan

1 BlackRock

2 Vanguard

3 State Street

4 Fidelity

5 Prudential Investment Management (PGIM)

6 JP Morgan

2 5 5 5 6 7 7

Provider Attribute

JP Morgan rank

Reliability Accessibility Performance Value formoney Support

63%

46%

30%

30%

28%

49%

44%

30%

25%

24%

53%

27%

52%

45%

30%

23%

22%

60%

39%

23%

18%

17%

17%

16%

46%

34%

21%

19%

19%

18%

18%

52%

43%

27%

22%

20%

19%

Product

Q17. And which of the following ETF providers would you pick for each of the following attributes?

Multiple answers allowed


KEY TAKE OUTS

• J.P. Morgan Asset Management’s Global ETF Study was commissioned as part of our long-term commitment to help our clients build even more robust portfolios.

• The study is among the most comprehensive of its kind. We surveyed 320 professional investors around the world, with average assets under management of $31.8 billion, to gain a detailed view of ETF allocations, ETF trading and the latest ETF investment trends.

• The respondents represent a broad range of investors, from independent wealth managers and discretionary fund managers through to private banks, fund of funds and insurance companies, providing a detailed snapshot of global investors’ attitudes towards ETFs.

• Three quarters of respondents are already ETF investors, rising to 85% in the US and 88% in Europe, the Middle East and Africa (EMEA). ETF market penetration among the professional investors surveyed is at 55% in both Latin America and Asia Pacific, suggesting potential for growth in these regions.


The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy.This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be. In Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.Copyright 2020 JPMorgan Chase & Co. All rights reserved.LV–JPM52866 | 08/20 | 0903c02a829d2db5

For further information please contact your local J.P. Morgan Asset Management representative or visit jpmam.com/etf.

METHODOLOGYThe Global ETF Study 2020 took place in late March to early April 2020, with 320 investors in the United States, EMEA, Asia Pacific and Latin America taking part. The respondents were fund selectors at a range of financial institutions of varying sizes. The research was commissioned by J.P. Morgan Asset Management and carried out by CoreData Research.

Documents

Global ETF Study 2020 - J.P. Morgan · AND SMART BETA ETFS • The respondents to the study are increasing their use of active and smart beta ETFs. In two to three years’ time,