How do Institutional Investors Choose ETFs? – Visual Capitalist

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The following content is sponsored by iShares

Download the ETF Snapshot for free.
Although there are roughly 7,000 ETFs available globally, the majority of assets under management (AUM) belongs to a relatively small number of funds. In fact, among the 100 largest ETFs, the top 20 hold over 50% of the assets.
In this infographic from iShares, we rank the top criteria institutional investors use when selecting an ETF. It’s the last of a five-part series covering key insights from the ETF Snapshot, a comprehensive report on how ETFs are being used.
To assess how institutional investors navigated this volatility, Institutional Investor published a report in 2021 based on a survey of 766 decision makers. Respondents were from various types of organizations, firm sizes, and regions.
For instance, here is how responses broke down by location:
Here’s what the survey found.
The following table lists the most important criteria institutional investors consider when selecting an ETF.
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The key takeaway is that institutional investors seek large, highly liquid ETFs that are linked to the right benchmark. Perhaps surprisingly, management fees and transaction costs were the lowest priorities.
To gain further insight, survey respondents were asked to share their most preferred index provider for each asset class.
For international equities, MSCI was the top index provider with S&P trailing a close second. The two providers switched places when it came to domestic equities.
n=766
Next, respondents ranked their top choices for factor-based and ESG investments. MSCI and S&P were once again the most popular providers.
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Lastly, respondents ranked their top choices for fixed income investments. This included three categories: investment grade fixed income, high yield fixed income, and emerging market debt.
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S&P was the most popular provider across all three categories, with FTSE Russell coming in second.

Want more institutional insights into ETFs?

Download The ETF Snapshot for free.

45% of institutional investors (n=762) said they consider an ETF provider’s value-added services when selecting an ETF.
“We use a number of tools—but we also rely on the provider of ETFs to a great extent. They have a lot of analytics in terms of trading activity, flows, and underlying liquidity of the asset class.
Senior Analyst, asset management firm
The following table ranks the most helpful value-added services.
n=762
To wrap things up, institutional investors were asked to share their ETF provider of choice. Here were the results.
n=762
To recap the findings of this survey, institutional investors give the highest priority to AUM, liquidity, and trading volume. Beyond those criteria, other elements such as value-add services and fees can help to drive a final investment decision.
Download the ETF snapshot for free.
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Carbon removal technologies are the best way to tackle rising global temperatures. Here we visualize how these technologies can help.
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According to climate scientists worldwide, global warming and the inevitable climate change can lead to severe catastrophic disasters. The only way to avoid this is to reduce greenhouse gas and carbon dioxide (CO₂) emissions.
According to the Intergovernmental Panel on Climate Change (IPCC), the global temperature rise must be limited to 1.5^oC. To achieve this, current CO₂ emissions must drop by 50% by 2030 and reach net-zero by 2050.
The following infographic by AFRY showcases how carbon removal technologies help facilitate the reduction of environmental CO₂ emissions and the role companies play in helping achieve these goals.
The most common way to reduce CO₂ emissions is through carbon offset technologies, namely avoided emissions and carbon removal. Though they serve a similar purpose, these two methods are fundamentally different.
One metric ton of CO₂ is reduced or avoided for every metric ton of CO₂ emitted in avoided emissions. This still leads to a positive increase in emissions overall.
On the other hand, carbon removal technologies completely remove and store one metric ton of CO₂ for every metric ton of CO₂ emitted.
Carbon removal technologies have a distinct advantage over the avoided emissions. For this reason, they could be the future of CO₂ emissions reduction. They are divided into short-term and long-term methods based on the CO₂ emissions they can remove and store.
Short-term methods include soil carbon sequestration, reforestation, biochar, wooden buildings, and more. Direct Air Capture with Carbon Storage (DACCS), Bioenergy with Carbon Capture and Storage (BECCS) and enhanced weathering are considered long-term methods.
Carbon removal technologies are the best way forward to reduce CO₂ emissions and limit global warming. DACCS and BECCS perform the best among these technologies and have the highest attractiveness.
Here’s why:
Despite being promising solutions, limitations exist for both. BECCS is associated with increased fertilizer use that further stresses nitrogen-saturated ecosystems, while DACCS is associated with high energy requirements.
Companies worldwide are aggressively trying to tackle their climate change targets and reach net-zero emissions. Carbon removal technologies are already rapidly being implemented in many parts of the world.
At the same time, companies shouldn’t be able to get away with making false claims either. There should be strict guidelines in place for companies, and they should be accountable for the claims they make.
The guidelines should include measures such as:
AFRY is a thought leadership firm that provides companies with advisory services and sustainable solutions, in their efforts to fight climate change and lead them towards a greater future.
Agriculture technology (Agtech) and food innovation have the power to revolutionize the way we produce food.
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The global food system is under immense pressure due to three overarching trends:
As these trends collide, agriculture technology (AgTech) and food innovation are emerging as two possible solutions. This infographic from Global X ETFs will explain both.
AgTech is the use of technology to maximize crop yields while conserving water and land. Here is a quick explanation of its segments.
Precision agriculture is the integration of artificial intelligence (AI) and the internet of things (IoT) into traditional farming practices. These technologies can provide farmers with more data, which in turn can be used to boost efficiency.
One example is the John Deere See & Spray machine, which uses various sensors to detect where weeds are. By only spraying weeds, farmers can reduce their herbicide use by up to 77%.
Robotics & automation aims to reduce the amount of manual labor needed in agriculture. This multi-billion dollar market includes autonomous berry pickers, which demonstrate over 60% more productivity than humans.
Drones can also play a role, especially in regions where water is becoming scarce. For example, farmers in California are investing in drones that monitor fields for leaks and other issues. They claim this technology reduces their water inputs by over 40%.
CEA is the cultivation of plants in an indoor setting. This market is still in its infancy, but the ability to grow food almost anywhere, all year round, could transform the playing field for agriculture.
One of the most prominent CEA methods is hydroponics, where plants are cultivated in a nutrient-rich water-based solution instead of soil. Hydroponics could mitigate many of the world’s agricultural problems:
Source: Princeton University
With pressures mounting on the global food system, innovative disruption will be needed to achieve long-term sustainability. AgTech solutions can certainly boost output, but what can be done on the consumption side?
Food innovation refers to plant-based foods and other alternatives such as lab-grown meat. Given the immense scale (and carbon footprint) of the meat and dairy industry, these innovations could reap environmental benefits.
In terms of market share, alternative foods still have a long way to go. The following table lists global meat and dairy sales, by category, in 2020.
Source: Global X ETFs
Considering that 80% of Americans have either purchased or are open to purchasing alternative meat products in the future, investors may view this sector as an attractive growth opportunity.
For further perspective, some analysts believe that by 2040, cultured meat (lab-grown meat) will account for 35% of the global market.
The Global X AgTech & Food Innovation ETF (Ticker: KROP) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive AgTech & Food Innovation Index.
As of 01/31/2022
Investors can use this passively managed solution to gain exposure to innovation in the agriculture and food industries.
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