Active ETFs catch the eye of RIAs and big funds, too

Active ETFs catch the eye of RIAs and big funds, too
According to CFRA data, through the end of last year, active ETFs made up 4% of all ETF assets, and represented 10% of ETF net inflows in the past year.
JAN 24, 2022

Independent registered investment advisers, as the largest buyers of exchange-traded funds, are forcing the asset management industry to dedicate more resources to the lower-cost, more liquid fund wrapper, and active strategies are increasingly coming along for the ride.

“There’s been demand and even stronger supply by asset managers to offer actively managed ETFs,” said Todd Rosenbluth, director of mutual fund and ETF research at CFRA.

According to CFRA data, through the end of last year, active ETFs made up 4% of all ETF assets, and represented 10% of ETF net inflows in the past year.

Some of the major old-school mutual fund players recently moving into the active ETF space include American Century, Davis Funds, Dimensional Fund Advisors, Fidelity, Franklin Templeton, Janus Henderson, JPMorgan, Nuveen, Pimco and Principal Financial.

“You get some of the benefits of the ETF structure, with tax efficiency and liquidity,” Rosenbluth said. “The fees tend to be better compared to active mutual funds because they have to cut the fees to be competitive.”

FOCUS ON ETFs

While assets are slowly moving into active ETFs, Rosenbluth said many traditional fund companies don’t have any choice but to develop ETF wrappers around active strategies because financial advisers increasingly are focused only on ETFs.

“Advisers are being given a choice, and the asset managers are hoping instead of pulling money from the fund family and going toward someone else’s ETF, that some investors and advisers like the strategy and the team and also like the benefits of an ETF and this is a happy middle ground,” Rosenbluth said.

“I think demand for active management and equity ETFs is building” he added. “For some of the firms that entered, they now have to be able to prove that they can function.”

Rosenbluth believes many of the legacy asset managers that have clung to mutual funds for so long will continue to migrate toward the ETF wrapper.

“Some of the money moving out of active equity mutual funds is doing so reluctantly into index-based ETFs, because investors and advisers prefer the ETF structure,” he said. “We’re going to see more of these [active] products. But it’s still hard for active management to demonstrate outperformance, and the ETF structure only offers some of the benefits. The portfolio managers still need to pick the right stocks.”

Latest News

Wall Street bonuses surged 32% to $47.5B last year, NY comptroller says
Wall Street bonuses surged 32% to $47.5B last year, NY comptroller says

The 2024 bump in bonuses made for the largest total pool in records going back to 1987, but economic uncertainty and federal changes weigh on this year's outlook.

Advisors seek transparency on DIY investing as Robinhood faces investigation
Advisors seek transparency on DIY investing as Robinhood faces investigation

'I feel like they have created an addictive gaming culture, which is not healthy for investing.'

Dynasty forges RIA custody partnership with Goldman Sachs
Dynasty forges RIA custody partnership with Goldman Sachs

The collaboration gives Dynasty's $105 billion network of over 500 advisors access to new custodial services, asset management, and lending expertise.

Investors turn cold on hottest emerging-market ETF as China back in favor
Investors turn cold on hottest emerging-market ETF as China back in favor

Record redemptions from the ex-China strategy came as money managers consider Beijing's latest stimulus push and Chinese AI optimism.

BlackRock boosts private market ambitions with new model portfolios
BlackRock boosts private market ambitions with new model portfolios

The "first of its kind" customizable portfolios, offered through a UMA, blend the giant asset manager's private strategies with public market access.

SPONSORED Focus on clients, not compliance – why Gary Corderman found his fit with Farther

This wealth management platform finally delivers on the technology promises other firms couldn't - giving advisors a better way to scale and serve

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'