Debut in Active ETFs Rise as US Investors’ Appetites Rise
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About 60% of the roughly 500 ETFs launched in the United States in 2021 are actively managed, according to data from Morningstar Direct. This is the first year that ETFs have been launched that are more active than index ETFs, according to data up to December 15.
Among them are the first ETFs from managers such as Putnam Investments, Harbor Funds, Alger and Gabelli, as well as the first active ETFs from Nuveen and BNY Mellon. It also includes the first active mutual funds to convert to ETFs, including half a dozen Dimensional Fund Advisors. JPMorgan Asset Management and Franklin Templeton also plan to convert products in 2022.
The new products appear poised to capitalize on what appears to be accelerating investor appetite for stock and bond selection strategies in an ETF envelope. According to Morningstar Direct, the $ 84.1 billion investors invested in active ETFs from 2021 through November is almost 50% more than the record sales of $ 57.4 billion last year.
Despite growing attention and assets, active strategies still play only a small role in the $ 7 billion US ETF industry. They accounted for just 10.5 percent of net sales and 4 percent of assets as of Nov. 30, according to Morningstar.
This article was previously published by Ignites, a title belonging to the FT group.
Raising market share under the sway of regular index funds could prove to be a difficult task. âThe money that has been put into the ETF space, which has sought out extremely inexpensive diversified products, is not going to become active again,â said Todd Rosenbluth, director of ETF research at CFRA. On the contrary, “people who have already adopted active management will increasingly choose the ETF wrapper”.
However, some research firms expect continued strong growth in less developed areas of actively managed ETFs, such as active equity products. ISS Market Intelligence expects sales of stock picking ETFs to generate between $ 325 billion and $ 590 billion in flows between 2022 and 2026. Active equity ETFs recorded just over $ 33 billion in cash flow. sales since the start of the year through November, according to Morningstar.
Admittedly, the adoption of active equity ETFs after the pandemic has been transformative for Ark Investment Management, the boutique founded in 2014 by Cathie Wood. The company’s assets have exploded since the start of 2020, from $ 3.5 billion to over $ 35 billion today (although this is down from a high of $ 50 billion in June. 2021) on $ 30 billion in net sales, according to Morningstar Direct data.
Ark’s focus on soaring stocks like Tesla would have caught the attention of investors, whether the products are actively managed or part of a thematic index, argued Nick Elward, senior vice president of institutional products. and ETFs at Natixis.
For the rest of the industry, the availability of portfolio protection technologies such as those licensed from NYSE, Fidelity, Precidian Investments and Blue Tractor, as well as proprietary models from T Rowe Price and Invesco, have opened the eyes of managers. portfolio on ETF envelope opportunities, Elward said.
Between non-transparent active ETFs and the first mutual funds to convert to ETFs, âactive managers see an opportunity in a type of vehicle that has many benefits that they can offer investors, such as tax efficiency and [lower] fresh, âhe added.
* Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.
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