Piggybank and calculatar with asset allocation pie chart

More and more investors will look to ETFs in the coming years and the markets will be influenced by trends such as artificial intelligence (AI), according to a recent survey conducted by Toronto-based Evolve Funds Group Inc.

The survey, which asked slightly more than 150 Canadian investment advisors about investor sentiment across several topics, revealed that advisors expect a 50% increase in their allocation to ETFs over the next two years. This means there will be an additional $32 billion in ETF assets from advisors’ clients within that time frame.

Investors are looking to ETFs because of their low fees, the ability to capitalize on a specific theme, and liquidity, according to the study.

The study suggests that in the coming years, there may be greater growth potential in active ETFs vs. passive ETFs. As it stands, most advisors are using active ETFs, yet only 20% of Canadian ETFs are active.

“You’re starting to see a lot more interest in active management because there are a good number of asset classes that you can point to that show good active management can make a big, positive difference on a risk-adjusted return perspective,” says Raj Lala, president and CEO of Evolve Funds.

Lala adds that active management has “historically made a significant, positive difference” when applied to asset classes such as small- to mid-cap equities, emerging markets and preferred shares.

Regarding trends, 79% of survey participants believe AI will have a major impact on the markets over the next two years. Cybersecurity (66%), blockchain (59%) and robotics (45%) also will play significant roles, they believe. Fewer advisors have such expectations of marijuana (35%) and cryptocurrencies (12%), according to the study.

Surprisingly, most advisors surveyed (54%) believe socially responsible investing (SRI) will not play a factor in their future decision making regarding investment. Only 35% say they plan to keep SRI in mind, while 11% are not sure.

“Most people don’t truly believe that investing in companies that are socially responsible actually leads to better portfolio returns,” Lala says. “Having said that, I think if you look at younger investors, especially millennials, it’s becoming far more important to them for their investments to make an impact.

“If you believe that we’re going to enter the biggest wealth transfer in history” he adds, “and that assets will be delivered from the older population to the millennials who are going to end up making the investment decisions, I think you’ll see that segment of the market grow significantly.”