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Global asset managers are gearing up to sell active exchange traded funds in the UK and Europe as the market is expected to reach $1tn by 2030, just as many traditional stockpicking funds suffer large outflows.
Some of the largest fund groups such as JPMorgan Asset Management, Fidelity International and Janus Henderson are preparing to launch further active ETFs this year, while others such as Jupiter are planning to enter the market for the first time, according to people familiar with the details.
Other companies including Abrdn have had “teach-ins” to train their sales teams on selling these products in anticipation of market growth.
“The [trend] that has caught a lot of people’s attention is the development of active ETFs,” said Patrick Thomson, Emea chief executive at JPMorgan Asset Management. “In Europe . . . the adoption rate is incredibly quick.”
Traditionally, ETFs are designed to track the return of an index, such as the S&P 500 or the FTSE 100. They have surged in popularity over the past decade because of their low fees and ability to be traded through the day on stock exchanges. The market, which is dominated by BlackRock and Vanguard, has grown to $13.8tn in assets under management according to Morningstar.
Active ETFs offer the chance to potentially beat the index because fund managers can pick certain securities and exclude others. Some active ETFs still follow an index very closely, while others deviate more in an attempt to generate higher returns. JPMorgan has $170bn of active ETFs globally and is the largest provider in Europe.
The growth in the market comes as mutual funds, which are actively managed and are generally priced once a day, come under pressure from high operational and regulatory costs and withdrawals from investors.
Active ETFs tend to have lower fees than mutual funds. For asset managers, they are cheaper to run and easier to sell across Europe because they all have the same structure, whereas mutual funds tend to require more analysts, sales and marketing staff. US investor Cathie Wood launched active Ark ETFs in Europe last year.
Research by Janus Henderson suggests that the active ETF market in Europe could grow from about $50bn to more than $1tn by 2030.
“We have a whole pipeline that we want to launch in Europe in 2025,” said Michael John Lytle, chief executive of Tabula, Janus Henderson’s European ETF subsidiary, which already has three of these products. “It’s ambitious — it’s not just one or two.”
Janus Henderson has $27bn of active ETFs in the US.
Alastair Baillie Strong, head of ETFs at Fidelity International, said it had “many new strategies currently under review in preparation for upcoming launches in 2025”. He added that “the accelerating growth of the active ETF market is a huge opportunity”, allowing the fund group to use its active management but in ETFs.
