Active ETFs gaining traction but many fund managers await SEC ruling on non-transparent ETFs

Nov 26th, 2015 | By | Category: ETF and Index News

ETFGI, a London-based exchange-traded fund consultancy, has published research showing that global assets under management (AUM) within active ETFs/ETPs have reached $32.9bn, as of 31 October 2015. The pace at which this segment of the ETF/ETP market has grown has also increased, with net inflows of $8.9bn year-to-date (YTD) representing a 23% increase over the previous record set last year.

Active ETFs gaining support but transparency concerns remain, according to ETFGI

Deborah Fuhr, Managing Partner at ETFGI.

There are currently 232 active ETFs/ETPs globally, comprising 322 listings, from 45 providers, across 15 exchanges. The US is the largest market in terms of AUM, with 133 products holding a combined $21.8bn of invested assets. Europe is the second largest with $6.3bn of invested assets spread between 20 products. Canada ($3.9bn invested in 65 products) and Asia Pacific ex Japan ($797m invested in 14 products) also have significant and growing active ETF/ETP markets.

Despite the growth, the $32.9bn invested in active ETFs/ETPs represents only 1.1% of the $3tn global ETF/ETP market and is small change compared to the overall size of the active mutual fund market. All this points to the huge growth potential of active ETFs. However, active fund management houses have thus far been reluctant to embrace the ETF/ETP wrapper owing to real or perceived transparency requirements (requirements vary across exchanges and jurisdictions), with fund managers resistant to disclose a fund’s holdings or reveal tactics and decisions which may result in others front-running their trades. This may soon be about to change thanks to product innovation and regulatory changes, according to ETFGI.

“Since 2007 over 80 applications have been filed in the United States with the Securities and Exchange Commission for active ETFs. Currently there are 31 issuers of active ETFs/ETPs in the United States. Many asset managers are waiting to see if/when the SEC allows non-transparent active ETFs,” said Deborah Fuhr, managing partner at ETFGI.

Those tracking fixed income exposures are the most prevalent (representing 73% of all current active ETFs/ETPs), followed by equity-based products (18%). Interestingly this is in contrast to index-tracking ETFs/ETPs which are distributed between equity-based (77%) and fixed income funds (16%).

Source and SPDR ETFs gathered the most net new assets in active ETFs/ETPs during October, pulling in $270m and $170m respectively. Both firms have increased their AUM for these products by $1.5bn YTD. iShares has been the most successful gatherer of new assets thus far in 2015, increasing their AUM by $1.9bn.

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