Institutional investors set to drive increased demand for actively managed ETFs

Institutional investors, including pension funds, are set to drive increased demand for actively managed exchange-traded funds (ETFs), according to Cerulli Associates.

Its latest issue of The Cerulli Edge – Global Edition, found that although actively managed ETFs are still only a small part of the overall ETF market, they have gained a decent share of new flows this year as investors braced themselves for interest rate rises and cheaper alternatives to active mutual fund strategies.

Commenting, Cerulli Associates director of European institutional research, Justina Deveikyte, said: “Institutional investors – including pension funds, insurers, sovereign wealth funds, and non-profits – are likely to be the main drivers of new business for actively managed ETFs in the short term.”

The assets under management (AUM) of European actively managed ETFs increased by €3bn during the first six months of 2021 to reach €15.8bn at the end of June, according to Morningstar data. The number of actively managed ETFs rose by two to 49 in the first six months of this year.

Compared to the U.S., there are relatively few active ETFs in the European marketplace, but those that have proved popular with investors this year include ultrashort-dated fixed-income strategies.

Cerulli’s report noted that actively managed ETFs combine the benefits of a well-diversified portfolio with the advantages of an ETF wrapper, including trading flexibility and cost efficiency. To provide investors with a wider range of options, ETF managers are launching ETFs that offer the same strategies as their traditional mutual funds.

Deveikyte notes that the quality of the underlying active strategy may be more important than the size of the manager when it comes to determining success. “Smaller managers are applying their in-house expertise in active management and knowledge to ETF strategies. This can help them gain assets across the fixed-income market and in areas such as environmental, social, and governance (ESG) investing in the equity market,” she said.

    Share Story:

Recent Stories

Podcast: The benefits of private equity in pension fund portfolios
The outbreak of the Covid-19 pandemic, in which stock markets have seen increased volatility, combined with global low interest rates has led to alternative asset classes rising in popularity. Private equity is one of the top runners in this category, and for good reason.

In this podcast, Munich Private Equity Partners Managing Director, Christopher Bär, chats to European Pensions Editor, Natalie Tuck, about the benefits private equity investments can bring to pension fund portfolios and the best approach to take.

Podcast - The power of three: Using Common Contractual Funds to improve tax outcomes for investors
Large asset owners are still investing in equities in a way where they are taxed on their income. The implication is that they get a poorer return. They need to, and can, improve this, but how?

In this podcast, AMX Head of Client and Manager Development, Aaron Overy, and AMX Product Tax Specialist, Kevin Duggan, discuss with European Pensions Editor, Natalie Tuck, about three options to help ensure good withholding tax outcomes for institutional investors.
Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows

Europe’s pensions challenges
Francesca Fabrizi meets Matti Leppälä, Secretary General and CEO of PensionsEurope, to discuss the key aims and objectives of the association today.