The growth of ETFs seems to have no ceiling, but far from being a passing trend, it reflects structural transformations in the way investors, advisors, and managers build portfolios globally. For Deborah Draeger, co-head of the South Chapter US of Women in ETFs, the current moment combines the maturity of the vehicle, accelerated innovation, and an increasingly strategic role for the US Offshore market.
“ETFs have already demonstrated their resilience even during periods of high market turbulence,” she states. More than three decades after the launch of SPY, the first ETF in the United States, the initial debate between active and passive management, or between ETFs and mutual funds, has given way to a much more pragmatic adoption. “Today, the discussion is not whether to use ETFs, but how to use them better,” she summarizes in an interview with Funds Society.
One of the clearest drivers of this expansion has been the shift in the profile of the institutional investor. According to data cited by Draeger, 67% of institutional investors already use ETFs frequently or extensively, mainly for liquidity management and hedging. This is complemented by the evolution of the retail investor, where ETFs have ceased to be tools for small portfolios and have taken on a central role even in households with more than $10 million in assets.
Within this process, the US Offshore market plays an increasingly relevant role. “There is a clear tax benefit for foreign investors in using UCITS ETFs instead of US-listed ETFs, something that for a long time was not fully understood,” she explains. As awareness of these advantages grows and the UCITS universe expands—including accumulating structures—adoption accelerates, especially among advisors managing international wealth.
This dynamic is reinforced by regulatory and operational developments in Latin America. The expansion of cross-listing schemes, such as the SIC (International Quotation System) in Mexico, and similar advances in Chile, Colombia, and Peru, have facilitated access to ETFs and reduced operational friction. “With a greater selection of products and easier trading, more investors adopt ETFs,” notes Draeger.
From the asset managers’ perspective, the attractiveness of the offshore channel lies not only in its current growth, but also in its long-term potential. “The growth of the US offshore market to date and its potential for continued growth is what is attracting managers’ attention,” she says.
Factors such as political uncertainty in some countries, the search for greater security in asset custody, and the breadth of investment options available in the United States continue to drive flows toward offshore structures. At the same time, international managers are strengthening their presence both in hubs such as Miami and Houston and in Latin American markets.
Draeger offered this example: according to a conversation with a major brokerage firm, 80% of its US offshore business comes from Latin America. Within the region, ETF demand can vary and be affected by regulation.
In terms of products, innovation is constant. Draeger highlights the advance of active ETFs, whose year-over-year growth exceeds that of passive ETFs, as well as the development of derivatives-based ETFs, buffer ETFs, and more sophisticated fixed income strategies. “The industry is moving toward solutions that allow for greater customization and better risk management, something especially relevant for high-net-worth offshore clients,” she notes.
Looking ahead, she anticipates that the next wave of growth will come from innovation in fixed income, multifactor structures, and derivative products, always with a central challenge: education. “The key will be to explain these products clearly and accessibly, so that advisors can use them responsibly,” she indicates.
