Active ETF assets are currently small, but growth is strong. In 2019, the SEC approved a new approach to support the creation of non-transparent ETFs. This article examines the case for active ETFs.
2020 is the 20th anniversary of ETFs in Europe and over the last two decades these products have shaken asset management’s cage, gaining over $5 Trillion of assets. ETFs and indexes
Active ETF assets are currently small given the size of the overall industry, but growth is strong. Active ETF AUM had seen more than 2 years of consistent asset growth, reaching a high in January 2020 of $162 Billion across the 779 Active ETFs available globally. It’s evident that if high quality active managers could combine their strategies with the attractive qualities of ETFs then both the manager and investor could win – but a new solution is needed.
In 2019, the SEC approved a new approach to support the creation of non-transparent ETFs, opening the door for active managers to benefit from the distribution power of the ETF wrapper. But aren’t ETFs supposed to be transparent and track an index?
We say no.
At HANetf we believe that ETFs are simply a wrapper and are not defined by the strategy they follow. Any liquid strategy or asset class – active or indexed - can be accommodated within the ETF wrapper which will then deliver that strategy to investors in the modern format they want.
The tremendous growth of ETFs, and the variety of new ideas coming to market demonstrates that advisers, model portfolio managers and end investors want a wide variety of tools, both active and passive, to help them meet their investment objectives, and they want them in an ETF format. Of course, ETFs are not a panacea for an underperforming active manager, but they do offer managers delivering real value the chance to rapidly extend their distribution and reach new types of investors.
In the last 20 years, ETFs have helped investors to gain access to new asset classes, sectors, themes and strategies- some of which were never available before. ETFs have done this while reducing costs, increasing tradability and making it easier to construct portfolios. It’s time to bring these benefits to the active management space, giving investors the active strategies they want in the wrapper they prefer, and enabling active managers to unleash the distribution potential of ETFs to help grow their businesses. Its time for non-transparent ETFs.
Click here to download our full paper: “Don’t Look: The Case for Active ETFs”
For Professional Investors Only. This content is issued by HANetf Limited, an appointed representative of Mirabella Advisers LLP, which is authorised and regulated by the Financial Conduct Authority.