Rarely is the direction within asset management so plain to see. The shift to ETFs has been gaining momentum and looks set to get turbocharged with the arrival of a new form of the wrapper.
Be it a clever marketing ploy or a legitimate piece of product innovation, the growth of active ETFs in Europe has taken the pin out of the grenade of traditional active management that has been threatening to implode for the past few years.
Active funds – excluding money market strategies – suffered €173.5bn net redemptions in 2023 versus €154.9bn and €52.8bn inflows into ETFs and index funds, respectively, according to data from Refinitiv.
Higher fees and poor performance have been the catalyst for the exodus.
Asset managers not currently considering entering the active ETF space are surely at risk of being late to the party – a move that could prove business critical in a fast-moving industry.
Within this, active ETFs have been growing their market share, although they still account for less than 2% of the European market at €45.5bn.
These figures make stark reading for asset managers yet to jump on the ETF bandwagon.
BlackRock’s latest round of launches is surely a clear sign to all that active ETFs are set to be the next battleground. The five ETFs are similar in proposition to JP Morgan Asset Management’s (JPMAM) systematic approach to active ETFs.
While time is of the essence for many of these asset managers, there is still an opportunity given the active ETF market in Europe is still in its nascent stages.
Repackaging active fund strategies into the ETF wrapper is currently the flavour of the day – via the systematic approaches of JPMAM, Fidelity and now BlackRock – but sooner or later investors might start demanding more.
This could lead to more concentrated active strategies coming to market, such as the likes of ARK Invest Europe, although here the performance issues could still be a major hurdle.
New entrants are currently trickling into the market via white-label providers or the takeover of defunct managers’ investment platforms.
The opportunity is there to grab the bull by the horns in the active space, with Janus Henderson entering the market by acquiring Tabula Investment Management in May and Jupiter Asset Management mulling an entry into ETFs via a white label issuer.
The arrival of Robeco later this year will also be interesting to watch. The asset manager has been building its ETF team out by taking top talent from other issuers, a strategy that could prove a successful one.
However, for those asset managers who have not seen the light, it is surely now or never.
