This week saw seven ETFs come to market across five issuers including a headline launch from US giant Janus Henderson.
The active asset manager unveiled the Janus Henderson Tabula Japan High Conviction Equity UCITS ETF (JCPN), an actively managed high-conviction strategy investing in a concentrated all-cap portfolio.
Meanwhile, Franklin Templeton introduced an emerging market ex-China ETF and a FTSE emerging markets ETF, while First Trust extended its suite of Strength ETFs with the launch of a quality growth equity fund.
Fidelity International followed suit with the launch of an active euro and US dollar corporate bond ETFs, while BlackRock introduced a US large and mid-cap ETF in which only ESG sector leaders are eligible for inclusion.
Fidelity and Janus Henderson’s ETF launches highlight the trend toward active. This was further demonstrated when data revealed German investors poured assets into actively managed ETFs over the past year, increasing from $26bn at the end of June 2023 to $42bn at the end of August 2024.
Index and ETF fees in focus
Self-indexed ETFs often charge higher fees than those tracking public indices, according to a study from Oxford University.
Despite eliminating licensing fees, these ETFs have 12-14% higher costs due to potential conflicts of interest and issuers - especially those with advisory services - are incentivised to promote higher-fee, self-owned products.
Although self-indexing promises cost benefits, actual savings often don't reach investors.
Meanwhile, passive ETF fees are expected to continue decreasing, while active ETF fees may see a slight increase, with downwards pressure on passive fees tied to market and regulatory reasons.
ETF pressure asset management profits
Rising demand for low-cost ETFs has pressured asset management profit margins, with European revenue margins falling from 29.7 basis points in 2019 to 27.5 in 2023, according to a recent study from German strategy advisor zeb Consulting.
Despite cost reductions, revenue declines outpaced savings, dropping profit margins from 9.9 to 8.2 basis points.
This trend is expected to continue, with projected further declines in revenue and profit margins through 2028 unless substantial growth in assets under management, rising earnings and unchanged costs occur.
