Across the globe, investor demand for exchange-traded funds (ETFs) resumed in 2023 and looks set to flourish in the coming 12 months. In the Asia-Pacific region, the ETF market posted double-digit growth outpacing the growth in Europe. China, Taiwan and South Korea are the biggest winners, helping Asian ETF players solidify their status as market leaders. The Asian ETF investor base has also expanded beyond portfolio managers with institutional and retail investors piling in, attracted to the lower costs and more efficient access to markets.
While ETFs are traditionally seen as a passive investment tool, actively-managed ETFs are gaining traction. Appetite for this type of ETF is high as they provide the flexibility to adjust and adapt investment strategies in response to market developments. As well, regulators are revising rules to better enable active ETFs and to support their further development. ETF providers are jumping on this trend launching funds to meet investor demand.
ETFs targeting environmental, social and governance (ESG) themes are also becoming popular as investors look for cost-efficient access to sustainable investing products. Likewise, fixed-income ETFs are getting a boost as interest rates and inflation continue to rise. The US approval of bitcoin ETFs, however, could prove to be a real game changer, particularly as it lends more credibility to the crypto investment space.
Meanwhile, ETF ecosystem participants face the challenge as the US transitions to a T+1 environment. Managing the timing discrepancies between settlement and subscription cycles will require changes to the workflow and ETF operating systems.
The Asset is pleased to be hosting the 5th ETF Asia Summit. The summit brings together investors, asset managers, policymakers and other stakeholders to discuss factors reshaping the ETF market landscape in Asia.