Exchange-traded funds (ETFs) offering exposure to global equities, short-dated bonds and commodities have been analysed more heavily by professional investors in recent months, research by FE Trustnet shows. 
In contrast, financial advisers and other professionals have been paying less attention to passive offerings covering emerging markets, the US and the UK.
Passive investing has been an increasingly powerful trend over recent years, with growing numbers of investors reduce how much they allocate to active managers. The latest BofA Merrill Lynch Global Fund Manager Survey found that around half of asset allocators use passive investments such as ETFs within their portfolios.
Percentage of AUM allocated to ETFs by professional asset allocators
Source: BofA Merrill Lynch Global Fund Manager Survey
With this in mind, we used the FE Analytics Market Intel Tool to review which ETF sectors the financial advisers, discretionary fund managers and other professional investors on FE Analytics had been researching more in 2018 compared with the past three years.
As the following table will show, it’s the Equity – International sector that has been attracting more attention in 2018. Over the three years to the end of 2017, the sector accounted for 5.65 per cent of ETF research on FE Analytics but this grew to 6.97 per cent in the first six months of this year.
This mirrors trends being seen in other parts of the fund management industry. Figures from the Investment Association recently showed that the IA Global sector was its most popular sector in May with net inflows of £460m while recent FE Trustnet research found that the professional investors have been spending more time researching global equity investment trusts in 2018.
A closer look at the data shows that investors are researching broad ETFs rather than more specialised strategies within the sector. The most popular product over 2018’s first half was the HSBC MSCI World ETF and all five of the most heavily researched Equity – International members track the MSCI World or FTSE All World indices.
There are some more specialist ETFs from the sector catching professional investors’ eyes. The iShares Edge MSCI World Value Factor UCITS ETF was the sixth most heavily researched product of the past six months while the iShares MSCI World Momentum Factor, Vanguard FTSE All World High Dividend Yield and iShares Ageing Population ETFs all proved popular.
Source: FE Analytics Market Intel Tool
Other passive equity sectors being more researched in 2018 than over the past three years include Equity – Europe inc UK and Equity – Tech Media & Telecom.
In the European sector, investors seem more willing to track specialist strategies. The iShares Edge MSCI Europe Value Factor, iShares Edge MSCI Europe Momentum Factor and iShares MSCI Europe SRI ETFs have been the most researched although they are followed by products tracking the broader MSCI Europe index.
When it comes to Equity – Tech Media & Telecom, the most researched ETFs of 2018’s first half were L&G ROBO Global Robotics and Automation, iShares Automation & Robotics, L&G Cyber Security, iShares Digitalisation and Invesco Technology S&P US.
Professional investors also continue to look for passive ways to access fixed income investments – although the BofA Merrill Lynch Global Fund Manager Survey noted that ETFs are still mainly used for equities. It found that 79 per cent of investors use ETFs to gain equity market exposure, while only 3 per cent use them for government bonds and 8 per cent for corporate bonds.
That said, the sector with the second-largest increase in research share this year was Fixed Int – USD Short/Medium Maturity, reflecting the fact that the Federal Reserve is progressing with its plan to gradually raise interest rates. iShares $ Treasury Bond 7-10yr, iShares $ Treasury Bond 1-3yr and UBS ETF - Bloomberg Barclays US 1-3 Year Treasury Bond were the three most researched products here.
Fixed Int – USD Index Linked, Fixed Int – Global, Fixed Int – EUR High Yield and Fixed Int – GBP Corporate Bond have also been more popular in 2018 than in the previous three years.
Commodities are another area that investors tend to use ETFs to access and the Commodity & Energy sector appears in seventh place for its increase in professional investor attention this year. The three most-researched ETFs track gold, which is a traditional safe haven, although products covering agribusiness, oil & gas exploration and natural gas have also been popular.
Source: FE Analytics Market Intel Tool
The above table reveals the ETF sectors with the largest falls in FE Analytics research share compared with the three-year average.
It’s clear how investors have turned away from emerging markets, reflecting the falling sentiment on this asset class caused by a potential trade war between the US and China as well as the impact of a stronger dollar.
Not only was Equity – Emerging Markets the sector that was hit with the biggest drop in research but peer group such as Equity – Asia Pacific ex Japan, Equity – Asia Pacific Single Country, Equity – Latin America and Fixed Int – Emerging Markets also became less popular.
Closer to home, concerns over Brexit, the uncertain political situation and the strength of the economy means that the Equity – UK and Fixed Int – GBP Government sectors have seen a fall in interest from professional investors. This has also been witnessed in the open-ended and investment trust universes.