niche investment / Olivier Le Moal

In the final months of this year and heading into 2022, Canadian advisors expect to lean more heavily into their use of ETFs — with increased focus on thematic funds, according to a survey from Evolve Funds Group Inc.

The company’s annual advisor sentiment survey, released on Friday and consisting of advisors’ outlooks for the period from Sept. 10, 2021, to Dec. 31, 2022, polled 208 advisors from across the industry. The majority (65%) of respondents to the online survey reported assets under management (AUM) of more than $100 million, and said the bulk of their clients (80%) were between the ages of 45 and 65.

For the average advisor in the survey, ETFs made up 23% of their reported AUM. But that’s likely to increase, given 77% of those polled expected to bump up their ETF holdings.

The vast majority of respondents (74%) were already invested in thematic funds, and almost as many (67%) intended to add more exposure in that area.

One reason could be millennial interest, said Raj Lala, CEO of Evolve, in a release, and he added: “Thematic ETFs focused on sectors like cybersecurity and electric vehicles have also demonstrated positive performance since their inception.”

The survey indicated that a high percentage of polled advisors (80%) were interested in cybersecurity as a theme, followed by cloud computing (60%) and electric vehicles (59%). Bringing up the rear were cryptoassets, with only 40% of advisors saying they’re invested in the space — and 31% of that group said client requests were the main driver.

For the remaining 60% who have avoided the cryptocurrency space so far, more than one-third (40%) were wary of its volatility. Yet, most of the advisors surveyed (80%) said Bitcoin would reign as the top cryptocurrency, even while 85% expected Ether to grow the most within the next year.

Throughout 2021, Evolve has been active in launching crypto funds, including a Bitcoin ETF and a direct custody Ether fund, and a prospectus was filed in August for a multi-crypto ETF. Lala acknowledged in the release that there are “a lot of barriers to investing in cryptocurrencies for investors.”

One challenge that advisors expect to face in 2022 is inflation-driven market risk, with 34% of those surveyed listing the obstacle. Issues with valuations (24%) and Covid-19-related hurdles (22%) were also noted. Investing in common dividend shares and fixed-income ETFs were identified as tactics by 75% and 40% of advisors, respectively.

As for where they’ll work in the months and year to come, advisors were split. More than half (57%) expected to spend nearly half of their time in the office — the same amount of time as now — but 41% said they’ll head to the office more. Nonetheless, virtual client meetings will remain important.