There’s a massive gap between active and passively managed exchange traded funds in terms of assets under management, but the former appears poised to make inroads against the latter.
The market volatility following March’s sell-offs due to the Covid-19 pandemic may have helped actively managed exchange-traded funds (ETFs) resurface in the capital markets. With the ability to shift with the ebb and flow of the markets, more upside could be ahead for active ETFs.
“The market is set to look significantly different three years from now compared with three years prior, according to the survey, as investors who once allocated 80% of their clients’ ETF portfolio to passive products anticipate only 61% in this space in the near future,” reports International Investment. “Active ETF allocation is set to grow from 12% three years ago to 21% three years from now, while smart beta is anticipated to grow from 8% to 18%.”
Active Angles for Active ETFs
Some advisors believe investors should be considering actively managed strategies, especially in the current market environment, when a more nimble manager may be better suited to navigate quickly changing conditions.
A recent JP Morgan Asset Management survey reveals “Active ETFs are most suitable for gaining exposure to a specific investment criteria, according to 58% of respondents, who also cited the ability to target specific investment outcomes (51%) and optimising tactical allocation (42%) in their top three benefits of the product,” according to International Investment.
There are other indications there’s a rising tide for active ETFs. Two heavyweights in the capital markets seem to agree as BlackRock and Vanguard are looking to take on the actively-managed exchange-traded fund (ETF) market with its own offerings for investors.
“BlackRock and Vanguard, which control a combined $3.8tn of the $7tn global ETF market, are currently only the fifth and 13th-largest managers in the active space, which is led by First Trust, Pimco and JPMorgan Asset Management, according to ETFGI,” the article added. “However, a survey of 320 institutional investors with combined assets of $12.9tn, found BlackRock and Vanguard were the two houses they would prefer to manage their active ETF investments. The juggernauts were in particular tipped to deliver both the strongest performance and the best value for money.”
For more on active strategies, visit our Active ETFs Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.