Actively managed exchange traded funds (ETFs) have become a global topic for the whole fund industry and not only for the ETF promoters around the world. When it comes to this, it is no surprise that an increasing number of active fund managers are launching actively managed ETFs to profit from this trend. It is also not surprising that these managers try to differentiate themselves from the competition by offering new investment strategies. While the first active ETFs (in Europe and the Asia Pacific region) were so-called research enhanced strategies, with a low tracking error to the parent index, we see now the launch of fully active ETFs where the securities in the portfolio are not determined by any index. In other words, the portfolio manager has full discretion over the securities he wants to include in the portfolio.
Nevertheless, the important question is, are actively managed exchange traded funds only piggy backing on the growing trend toward ETFs globally, or are they a trend of their own?
Graph1: Market Share of Assets Under Management Held by ETFs Globally (December 31, 2016 – May 31, 2026)
Source: LSEG Lipper
Graph 1 shows that the market share of actively managed is increasing over time. This means that the assets under management are growing faster than the already fast-growing assets under management in ETFs globally.
Therefore, it can be said that actively managed ETFs are not only a trend of their own, but they are also a main growth driver for the assets under management held in ETFs globally. It can also be concluded that the introduction of actively managed ETFs has bridged the gap between the two sides of the investment industry. In addition, actively managed ETFs are set to enable investors to choose from a wide range of products with lower total expense ratios compared to their mutual fund peers.
Last, but not least, one needs to bear in mind that investors around the globe have different motivations to buy actively managed ETFs. While U.S. investors enjoy a tax benefit from owning the ETF compared to a respective mutual fund, investors in other parts of the world do not have such an incentive. Hence, the growth of actively managed exchange traded funds in the U.S. was faster than in the rest of the world, but it can be said clearly that the investor demand for these products in other parts of the world has been grown more naturally.
The views expressed are the views of the author, not necessarily those of LSEG.
This article is for information purposes only and does not constitute any investment advice.
