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BNY Mellon review finds derivatives and alternatives ETFs most popular


A new review of ETFs from BNY Mellon, covering the nine months to end September 2015, reports that ETFs representing derivatives and alternative strategies were the most popular type of product.

Alternatives and derivatives-based ETFs accounted for 25 per cent of new funds over this period, continuing the trend seen in 2014 when they accounted for the same percentage.
Smart beta ETFs accounted for 12.5 per cent of new launches, fixed income accounted for 6.25 per cent, and actively managed ETFs accounted for 5 per cent. BNY Mellon serviced a total of 64 new funds in the nine-month period.
Speaking at BNY Mellon’s annual ETF Symposium in Dana Point, California, Steve Cook, business executive, structured product services at BNY Mellon, said: “Growing interest from registered investment advisers looking for downside protection appears to be an important driver of the growth of alternatives-based ETFs.  In addition the possibility of rising interest rates has advisers looking for alternatives to fixed income investments.  The structure and tax efficiencies of ETFs enhance the attractiveness of this type of investment.”
He attributed the increase in smart beta ETFs launched and serviced by BNY Mellon in 2015 to the increasing number of entrants developing these offerings.  In 2014, this type of ETF accounted for 4.4 per cent of BNY Mellon’s new ETF strategies.  The number of actively managed ETFs launched in 2015 declined to five per cent from 25 per cent in 2014, BNY Mellon said.
“We attribute the lower level of actively managed launches in 2015 to pending regulatory rulings on this segment of the ETF market,” said Cook.  “Many firms with these active offerings in the pipeline are awaiting the outcomes on these rulings before moving ahead.  We expect a significant upswing in actively managed ETF launches once the new regulations become clear.”

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