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Active ETFs Surge as Investors Seek More Risk in Exchange Traded Funds

Strategic Insights

— 2 min read

Asset managers are launching active exchange traded funds at a record rate this year, hoping to capitalize on growing investor interest in versions of these low-cost vehicles that take more risk than standard index tracker products. According to Morningstar, twice as many active ETFs as passive tracker ETFs have been launched across the US and Europe this year, with a greater number of active ETFs now existing in the US than their passive peers. Heavyweight firms such as BlackRock and JPMorgan Asset Management are rolling out more active ETFs, while Jupiter and Lazard debuted their first active ETFs this year, and Aviva Investors is considering launching such products.

Key Takeaways:

  • There were 476 active ETFs launched across Europe and the US in the first half of this year, compared to 565 passive ETFs launched in the same period.
  • The number of active ETFs in existence has surpassed the number of passive ETFs in the US, according to Bloomberg data.
  • Heavyweight firms such as BlackRock and JPMorgan Asset Management are rolling out more active ETFs, while Jupiter and Lazard debuted their first active ETFs this year.
  • Aviva Investors is actively considering launching active ETF products.
  • Active ETFs are being attracted by investors seeking downside protection, with some using derivatives to reduce equity market risk.
  • Computer-driven strategies take slightly bigger or smaller positions in securities to outperform a passive mandate.
  • Average fees for active ETFs in Europe are 0.26%, slightly higher than the 0.2% charged by passive ETFs.
  • Regulatory changes, such as the introduction of "semi-transparent" ETFs, are expected to usher in a greater number of higher-risk ETFs in Europe.
  • Industry insiders believe these changes will remove obstacles that have deterred firms from launching more concentrated and higher-risk ETFs.
  • Digital neo-brokers are also driving flows into active ETFs, particularly with younger investors in Germany.

Statistics:

  • 476 active ETFs were launched across Europe and the US in the first half of this year.
  • 565 passive ETFs were launched across Europe and the US in the same period.
  • Average fees for active ETFs in Europe are 0.26%.
  • Active ETFs hold $1.2tn of assets in the US and Europe, compared to $13tn for passive funds.
  • Active assets have more than doubled since the end of 2023, growing at a faster rate than passive assets.
  • JPMorgan Asset Management forecasts global assets in active ETFs to quintuple to $6tn in the next five years.

Sources:

  • Bloomberg
  • Morningstar
  • Fidelity International
  • JPMorgan Asset Management
  • Aviva Investors
  • Jupiter
  • Lazard

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