Actively managed ETFs demand their share of the ETF pie


The exchange-traded fund markets are seeing record inflows this year and currently carry $ 6.6 trillion in assets according to Bloomberg. While the markets have been dominated by passive ETF investment vehicles, actively managed ETFs are taking increasing market share.

In 2021, actively managed products took three times their share of the $ 500 billion invested in ETFs according to Bloomberg. More importantly, active funds are introduced twice as fast as passive funds and have already increased their market share by a third this year. Fund issuers have launched 156 actively managed products so far this year, compared to 77 passive funds launched.

ETFs were originally built around the concept of indexing and all of the benefits offered by the following indices. Yet the pandemic has altered investment patterns to some extent, meaning that asset managers are taking advantage of equity conditions which are highly beneficial for an active management style.

“Historically, people thought ETFs were indexed,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research. “Then Ark became a household name, and then investors realized that not only these products were worth considering, but so were others. “

Since the start of the year, there have been $ 62 billion in entries into actively managed ETFs, which translates to 12% of total flows entering a part of the market that represents only 4% of assets. .

With a rule change in 2019 that made it easier to launch ETFs and allowed for new ETF structures that could obscure the strategies being used, stockpickers are thriving in today’s market climates. Wall Street player T. Rowe Price is part of this group, which currently owns 5 actively managed ETFs.

Passive funds still dominate, with $ 11 trillion in assets under management between mutual funds and ETFs, and are expected to account for half of all registered US assets held in funds within five years. Active funds closed at the end of 2020 with a 13% gain from the previous year with $ 13.3 trillion in assets under management and continue to take increasing percentages of market share.

“We will see the percentage of assets in actively managed ETFs continue to increase,” said Rosenbluth of CFRA. “They’re going to continue to have the ability to hit over their weight. “

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