Once overlooked by the market, actively managed ETFs have now become one of the fastest-growing segments of the global asset management industry, with assets approaching the trillion dollar mark.

With the US Securities and Exchange Commission's revisions to ETF rules in 2019, which simplified the process of introducing new ETFs, and retail investors (especially young investors) showed a sharp increase in interest in ETFs, ETFs actively managed are now becoming more and more attractive.

Compared to traditional mutual funds, actively managed ETFs have lower costs and are more flexible in trading. On the other hand, actively managed ETFs have higher management fees than passively managed ETFs, which also stimulates fund managers to issue actively managed ETFs. According to ETFGI data, by the end of July, the asset size of this type of ETF had reached 974 billion US dollars.

“We are in the early stages of growth,” said Todd Rosenbluth, head of research at consulting firm TMX Vettafi. “The ETF industry will continue to grow, and active ETFs will continue to grow at a faster rate because they are newer.”

He added, “More and more professionals are beginning to pay attention to and participate in the development of active ETFs, and marketing efforts are increasing, hoping to attract more investors.”

Active ETFs have become the new favorite of investors

Investors are increasingly favoring active ETFs as more attractive investment tools.

Over the past decade, domestic equity mutual funds actively managed by the US have experienced a net outflow of 2.5 billion US dollars, while active ETFs have attracted large inflows.

According to Morningstar data, active ETFs listed in the US attracted a record amount of gold in July, reaching 27.9 billion US dollars, before hitting high levels in January and March.

According to BlackRock's data, in the first half of 2024, global active ETFs accounted for a record 22.4% share of the net inflow of $665 billion of all ETFs, accounting for 41% of ETF issuance during the same period.

Todd Rosenbluth believes that traditional investors are gradually accepting ETFs as an investment method. For example, Capital Group's $CAPITAL GROUP DIVIDEND VALUE ETF (CGDV.US)$ , the ETF, which focuses only on high-dividend and value investments, has attracted $10.4 billion since its launch in 2022; and T Rowe Price's $T. ROWE PRICE CAPITAL APPRECIATION EQUITY ETF (TCAF.US)$This ETF, managed only by well-known fund manager David Giroux, has also achieved good results.

It should be noted that the active ETF industry is still only a fraction of the mutual fund industry: according to the Association of Investment Companies, in the US alone, long-term actively managed mutual funds held 13.8 trillion US dollars in assets by the end of 2023.

The friendliness of the regulatory environment will directly affect the development of active ETFs

Some analysts believe that regulation is still the key to determining whether active ETFs can continue to grow rapidly.

“One of the challenges facing the world is that many regulators equate ETFs with indexed funds when formulating regulations, so regulations need to be amended to adapt to the emergence of active ETFs.” ETFGI founder Deborah Fuhr said.

As the development potential of active ETFs gradually became apparent, more and more countries began to ease regulatory restrictions on active ETFs, creating a better environment for their development. Countries such as South Africa, Japan, Singapore, and France have relaxed or are about to ease regulatory restrictions on active ETFs.

Industry giants are also actively promoting the development of this market. Major asset management companies such as J.P. Morgan, Fidelity, and BlackRock have all launched active ETF products. These companies have huge sales and marketing teams to help reach distribution agreements through investment platforms.

Some fund groups are trying to replicate Vanguard's (Vanguard) ETF structure in order to improve the flexibility and efficiency of ETFs. However, these applications have yet to be approved by the US Securities and Exchange Commission (SEC).

It is worth noting that although active ETFs are developing rapidly, they are currently unable to completely replace traditional active mutual funds. Currently, active ETF success stories mainly focus on special strategies, such as options-based strategies, such as buffered and covered call funds (buffered and covered call funds) and systemic strategies.

edit/new