By David Mann, Head of Capital Markets, Global ETFs, Franklin Templeton Investments.
David Mann, Head of Capital Markets, Global ETFs, Franklin Templeton Investments.
Before getting into my predictions for 2019, I need to have some honest reflection on how I did last year. Let’s recap my 2018 predictions and give myself a grade on each.
- Active equity ETFs will make a surprising asset leap
Grade: B-
On the one hand, I was right about the increased adoption of active ETFs. Last year, we saw $14 billion go into active ETFs, and this year we just crossed the $25bn mark. Nice!
However, of those $25bn of inflows, only a little more than $3bn went into active equity ETFs. That is actually down from the $4bn of inflows last year. Active fixed income ETFs earned the lion’s share of inflows in 2018, at almost $20bn.
The total assets under management (AUM) of active ETFs is now almost $70bn, with most of that in fixed income. Maybe people are starting to appreciate the flaws with indexed fixed income ETFs?
- The interest in low-cost passive ETFs is not going to change.
Grade: A
I do not see this trend of investors looking to get low-cost exposure to a particular market changing any time soon. These stats from Bloomberg, seem to confirm this view:
Average management fee of the top ten ETFs in terms of inflows: nine basis points;
Average management fee of the top ten ETFs in terms of outflows: 35 basis points
- More niche areas
Grade: B
In 2018, there were more than 200 ETFs brought to market. Many of them were incredibly specialized thematic plays, so it is true that we saw more niche areas. However, I didn’t give myself an A on this, because not many of those attracted significant assets. That said, I will most likely revisit this theme next year, considering the time it usually takes for an ETF to gain acceptance. We may very well see things change.
- Possible ETF-related regulations
Grade: A
This one was an easy A, because we have a proposed ETF rule! I blogged about it. And, Franklin Templeton has a comment letter. I was tempted to knock myself a half grade considering this was a repeat prediction, but it’s been a long time coming, and finally gained traction in 2018.
Overall: Not too bad!
2019 predictions to follow.
(The views expressed here are those of the author and do not necessarily reflect those of ETF Strategy.)