The outlook for actively managed ETFs is increasingly robust and that could matriculate down to active non-transparent ETFs (ANTs), the newest fund structure.
Constructed similarly to flagship investment strategies that have served fund family clients well for decades, the active ETFs use the same portfolio managers as their corresponding mutual funds and employ the firm’s long-standing strategic investing approach, characterized by rigorous research, risk awareness, and independent decision making.
ANTs are still in their formative stages with the entire lineup of these products having debuted this year, but signs are emerging these funds will play important roles in driving increased adoption of active ETFs.
“J. P. Morgan Asset Management’s Global ETF Study for 2020 was conducted during a particularly fraught moment: late March to early April 2020, when global financial markets were unnerved by the novel coronavirus,” reports Andrea Riquier for MarketWatch. “Still, the firm found 320 firms globally to survey, ranging from independent wealth managers to insurance companies to private banks.”
Getting Active With ANTs
ANTs complement an issuer’s traditional mutual fund offerings and deliver the key features associated with existing ETFs that some investors may prefer, including continuous daily trading, real-time market determined pricing, and tax efficiency. For issuers of ANTs, there are some compelling growth opportunities.
Respondents to the J.P. Morgan survey “expect funds with environmental, social, and governance aims, and thematic ETFs, to see the most growth,” reports MarketWatch. “Of note, larger investors are likely to see active ETFs as a good way to access ESG and for adding alpha to portfolios, while investors with less assets under management said they think active ETFs are good tools for portfolio diversification.”
As of mid-July, the first time, new actively managed ETF launches are outpacing those of new index-based offerings as more money managers eye the ETF space. In what appears to be a first in at least two decades, the debuts of new active ETFs have outstripped new passive index-based ETFs, with 68 active ETFs launching in 2020, compared to 63 passive ones, Bloomberg reports.
ANTs are contributing to that growth. Further adding to interest for actively managed ETFs, innovative ETF structures that offer a semi-transparent portfolio methodology have also attracted greater interest among stock-picking money managers who are warier of potential frontrunners if they were to offer a traditional fully transparent ETF.
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.