onut chart and bar chart showing willingness to invest in an ETF share class of a mutual fund. Overall, 82 percent would invest. By region, interest is highest in the United States at 86 percent, followed by Europe at 82 percent and Greater China at 77 percent.
A note from our ETF Servicing team
For more than three decades, ETFs have proven their ability to evolve through market cycles, regulatory change, and shifting investor expectations. As an ETF servicing provider operating at the center of this ecosystem, we work alongside issuers every day as they navigate ETF product launches, operational complexity, and global growth ambitions. That vantage point gives us a clear view of how investor behavior is changing and where opportunity is emerging.
Unsurprisingly, ETF adoption continues to climb, especially in active ETFs. In our 13th edition, we wanted to look beyond the year-over-year growth and assess the path forward for the ETF industry:
- What areas of ETF innovation are of interest to investors?
- Where does the hype not match the reality?
- Where is there uncharted opportunity?
Results show that ETF investors are embracing innovation, but with clear expectations around liquidity, transparency, and operational readiness.
Product innovation alone is no longer enough; success depends on aligning investment ideas with operational readiness, distribution realities, and investor expectations. The sections that follow explore new trails for ETFs—and how issuers can position themselves to meet investors where they are headed.
ETF innovation on the horizon
ETF investors continue to look beyond traditional exposures, particularly where new structures expand access while preserving the core benefits of the ETF wrapper.
Among these emerging structures, interest is especially strong in ETF share classes of mutual funds, which blend operational familiarity with ETF efficiency. A large majority of investors say they would invest in an ETF share class, signalling that hybrid structures may become important for future growth globally.
Private markets ETFs are also firmly on investors’ radar. While historically constrained by liquidity and access, private assets packaged in an ETF structure are increasingly viewed as a viable way to broaden participation. Nearly all investors surveyed would consider allocating to private markets through an ETF, underscoring both appetite and expectation for further development in this space.
What investors want is not novelty for its own sake, but innovation that solves portfolio challenges, whether through defined outcomes, differentiated income, or expanded access..^%^
Full-Width Media
Coniderations for Managers
These product structures may be ideal for an asset manager who is managing active strategies and is wary of publishing their holdings daily. When considering whether these products are right for their firm, managers should ask themselves:
- Which product structure is right for my strategy?
- How will I price these products alongside my existing investment menu?
- Should I seek to replicate existing strategies or launch something new?
- Will broker/dealer platforms support these products?
- What are the operational nuances that are unique to these products?
- How will I need to adjust my distribution strategy to support these products?
- How should I structure my capital markets team to support these products?
Asset managers should consider what strategies may work in this wrapper and how a proxy-basket, semi-transparent active offering could be added to their capabilities. BBH is ready to discuss these products in more detail and welcome the opportunity to engage with firms in deeper dialogue about this development.
Over the past 15 years, Brown Brothers Harriman (BBH) has partnered with more than 40 asset managers and sponsors to bring ETFs to market in the US, Europe, and Hong Kong. BBH has worked with all four proxy product sponsors and other third-party providers to design an operating model to service these products.
On December 10, the SEC approved new proxy-based, semi-transparent active ETF structures from Natixis/New York Stock Exchange (NYSE), T.Rowe Price, Fidelity, and Blue Tractor Group. While each of the products is unique, they all use “proxy baskets” to avoid the possibility that investors will use disclosed information about an ETF’s holdings to front run the strategy. These structures may provide a compelling option for active managers to enter the ETF market without revealing their “secret sauce.” In this edition of Exchange Thoughts, we break down the different features of these active structures.
Nulla in commodo felis, at luctus turpis. Fusce aliquam a dui eu semper. Mauris semper lacus in volutpat condimentum. Vestibulum nibh nulla, retrum sed tortor eu, rhoncus lacinia sem. Sed id commodo ex. Integer hendrerit aliquam quam, nec iaculis metus feugiat sit amet. Nulla in commodo felis, at luctus turpis. Fusce aliquam a dui eu semper. Mauris semper lacus in volutpat condimentum. Vestibulum nibh nulla, retrum sed tortor eu, rhoncus lacinia sem. Sed id commodo ex. Integer hendrerit aliquam quam, nec iaculis metus feugiat sit amet.
