We asked investment professionals for their views on product trends for 2021. Some of their answers might surprise you!
In terms of products, what do you think investors will be seeking in 2021?
[Matt Gaden, Head of Australia at Janus Henderson Investors] I think investors will always seek opportunities to grow their wealth – and during periods of uncertainty they look for managers they can trust, and ways of investing that offer ease and convenience. So we're likely to see further growth in active ETF's as managers look to meaningfully replicate their most popular unit trust offerings. Active ETF's are nascent as part of the overall ETF pool of assets in Australia today, but they represent a logical extension of a manager's best capabilities into the advised SMSF space and direct channel. I also think clients are looking for meaningful exposure to ESG and more and more are looking for a proven active approach that can actually make them money, as opposed to solely representing personal views on climate change or seeking better boardroom governance.
[Ilan Israelstam BetaShares co-founder and head of strategy] One major trend we see continuing into 2021 is the increasing interest in ethical investing. Concerns around the environment and global warming have been on the rise in recent years, and ESG considerations have been brought further into focus in 2020 as a result of both last summer’s bushfires and the COVID-19 pandemic. Australian investors are increasingly expressing their ethical values in their investment choices, and tens of thousands of investors have chosen to invest in ethical ETFs. We’ve seen strong inflows into ethical ETFs this year, with nearly $1.2 billion in new money to the end of November.
Where are the gaps in the market?
[Matt]The two main gaps I see in the market are reflected in my response the first question. The active ETF market is set to grow rapidly from a low base and will be given a 'leg up' by the recent variations to unlisted unit trusts which allow them to be treated as listed vehicles in their own right. There remains a dearth of funds offering proven active approaches to ESG or sustainable investing and there are some great managers offshore who will likely find their way to our market.
[Ilan] Another trend we expect to gather pace is the demand for cost-effective multi-asset investment solutions that help to simplify portfolio construction, asset allocation and overall investment management.
What do you think will be the next big thing in 2021?
[Matt] 2020 showed us that you never know what a year may bring! But I do think we'll see an ever increasing number of financial advisory firms with sufficient assets under advice move to institutionalise their businesses in the next few years. I can easily envisage some advice firms shifting to a more consultant-like relationship with their research houses and a more wholesale approach with fund managers. This could, in turn, create a more bespoke approach to the way they invest with managers and on the flip side, will require those managers chosen to have a broad skill set and diverse investment capabilities that can be genuinely used as building blocks to better meet client needs.
[Ilan] We’re seeing demand for ‘all-in-one’ investment products both from self-directed investors, including SMSFs, and from financial advisers, who are looking to streamline the process of managing client portfolios. [Betashares is about to launch a range of Ethical Diversified ETFs]. These ETFs are cost-effective, all-in-one ethical investment solutions that can help to simplify portfolio construction, asset allocation and investment management for ethical investors.