Exchange Traded Fund Update
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With the acceleration of people’s enthusiasm for low-cost tools, the inflow of funds into exchange-traded funds has exceeded the record global inflow in 2020, prompting more and more traditional fund managers to launch their own ETFs.
As of the end of August, the net inflow of global investors reached 834.2 billion U.S. dollars, surpassing last year’s 762.8 billion U.S. dollars. According to data from data provider ETFGI, rising markets and investments have helped global ETF holdings soar to US$9.7 trillion, more than double the US$4.8 trillion under management of funds and products at the end of 2018.
U.S. exodus drives growth From traditional actively managed mutual funds, Usually charge higher fees.
Todd Rosenbluth, CFRA ETF and Mutual Fund Research Director, said: “During the global financial crisis, many actively managed funds failed to keep up with common benchmarks, partly because of high fees.” He added, Moving to the fee-based advisory model and moving away from the introduction committee also supports the adoption of ETFs.
According to data from the Association of Investment Companies in Trade Institutions, actively managed U.S. equity mutual funds have experienced net outflows in 12 of the past 13 years, with a cumulative outflow of US$2.8 trillion since 2008.
“Since the end of the global financial crisis in 2007/08, the shift of investors from actively managed funds to ETFs began in the United States and has spread to all corners of the financial market. Active managers know that competition from ETFs is intensifying everywhere. , They must respond,” said Deborah Fuhr, founder of ETFGI.
According to data from Morningstar, in the first six months of this year, 199 ETFs were launched in the United States, while only 109 mutual funds were launched.
Large active management companies have now abandoned their long-standing opposition to the adoption of ETFs and entered a market dominated by BlackRock and Vanguard, the two largest ETF providers in the world.
Capital GroupThe ETF, which manages $2.6 trillion in assets, announced last month that it intends to launch six actively managed ETFs by the end of March.
Capital’s CEO Tim Armour said at the time that there was “no reason” why ETFs could not become the $500 billion business of the Los Angeles-based management company, which would make Capital one of the top 10 global ETF management companies. name.
Federated Hermes is an asset management company headquartered in Pennsylvania with a market value of $646 billion. It has also applied for regulatory licenses for two actively managed fixed-income ETFs, which it hopes to launch as early as November.
Both Capital and Federated Hermes admitted that their decision was influenced by changes in the preferences of US financial advisers.
“There are many financial advisors that cannot or cannot access [Capital’s actively managed] U.S. funds prefer to provide ETF tools to customers because they prefer,” Armour said.
Goldman Sachs launched its first actively managed transparent ETF in July and plans to launch more thematic strategies in the same format.
JPMorgan Chase plans to convert four mutual funds with total assets of more than US$10 billion into active transparent ETFs early next year.
Capital flows into actively managed ETFs, thanks to the success of Cathie Wood’s main actively managed ETFs Ark ETFThis year has also accelerated, reaching 95.2 billion U.S. dollars by the end of August, compared with 91.1 billion U.S. dollars in 2020. This increased the global assets of actively managed ETFs to US$413.2 billion.
“The two largest asset management companies in the United States—Capital and Federated—decided to switch to active ETFs and will provide more encouragement for other smaller players to follow suit,” Fuhr said.