Written by Suzanne McGee
(Reuters) – Assets in actively managed exchange traded funds (ETFs) around the world reached a record $1 trillion at the end of August, boosted by a wave of deregulation and product innovation, data provider ETFGI said. did.
Active ETFs aim to outperform the index they benchmark against, such as the S&P 500, Nasdaq 100, or Russell 1000 Growth Index. Bear Stearns launched its first active ETF in 2008.
Matthew Bartolini, head of SPDR Americas research at State Street Research, told Reuters that while active ETFs account for only 7% of global ETFs, they have seen an increase in overall fund inflows over the past few years. He said it accounts for 30%. The latest episode of Inside ETF.
A key growth driver, analysts say, is a 2019 regulation widely known as the ETF Rule that streamlines the complex process of gaining active ETF approval from the U.S. Securities and Exchange Commission. Assets in the active ETF category have increased about 10x since 2019, according to data from ETF.com.
Growth continues this year. Active ETF assets soared 42% as of Aug. 31, according to ETFGI data.
Bartolini said looser regulations are also fostering innovation, encouraging issuers to take novel approaches to products as they compete for investors' money.
Active ETFs range from run-of-the-mill ETFs like the BlackRock Large Cap Value ETF to more niche products like the AdvisorShares Vice ETF, which invests in stocks of companies involved in the alcohol, tobacco, and cannabis industries. It will span.
“These regulatory rule changes have really accelerated some of the more novel approaches that ETF issuers can bring to the market,” Bartolini said.
Active ETFs include volatile products such as the Ark Innovation ETF, which soared 152% in 2020 but fell 23% the following year. So far in 2024, the S&P 500 is down 9.74%, compared to a 20% gain for the S&P 500 index. Others, such as leveraged ETFs that track the performance of individual stocks like Nvidia, magnify the risk.
Nor are all active ETF issuers doing well.
According to a Morningstar report earlier this year, the 10 largest issuers accounted for 75% of active ETF assets. The bottom half of active equity ETFs hold just 3% of the group's total assets.
“ETFs that repackage old-school stock picks are having a hard time attracting assets,” Morningstar Manager Research Analyst Jack Shannon said in a note released Tuesday. .
Active ETFs may require more due diligence from investors, said Tim Huber, senior vice president of ETF services at Brown Brothers Harriman. Nevertheless, he believes the category has reached a tipping point.
A Brown Brothers survey found that more than 90% of ETF investors intend to increase their allocation to active ETFs, Huber said.
“I think we'll get to 2 trillion much faster than it took us to get to the first 1 trillion,” Huber said.
(Reporting by Suzanne McGee; Editing by Ira Iosebashvili and Leslie Adler)
