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Alan Sippetts, Heartwood

ETF and tracker funds are obvious threat to active managers of single class funds

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Alan Sippetts (pictured), Investment Director, Heartwood Investment Management on how the London Stock Exchange is seeing record ETF trading as investors turned to passive vehicles…

ETFs and tracker funds are an obvious threat to active managers of single asset class funds due to the proliferation of passive vehicles in the last few years, accelerated by the arrival of US ETF managers into the marketplace. But that’s from a single asset class perspective.
 
For active multi-asset class managers, who invest across the full spectrum of investment instruments, the broader choice of funds provides more levers to add alpha. The increased number of funds includes many with niche investment mandates, allowing specific themes to be pursued.
 
Also, the lower dealing costs and quick trading associated with ETFs allow active multi-asset class investors to switch between funds more easily, and at limited cost. Multi asset managers have more opportunity to add alpha through an active tactical allocation process, and should openly welcome the increased number of ETFs. These are essential tools, not second class citizens to be looked down on.

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