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Active ETFs punch above their weight at USD44bn in 2023: Bloomberg Intelligence

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A new report from Bloomberg Intelligence (BI) on the ETF sector reveals flows into active ETFs have been a strong theme this year, at USD44 billion. Legacy asset managers like DFA, JPMorgan, Capital Group and American Century have led the charge into active ETFs, notes BI, and the firm expects these asset managers to stay the course.

Eric Balchunas, BI Senior ETF Analyst, says: “When the average person thinks of ETFs, passive investing comes to mind. That’s because passives were the first use case and make up 94 per cent of US ETF assets under management, while active funds account for just 5.8 per cent. Yet active flows have outpaced their market share, with about 30 per cent this year. As legacy active managers like DFA, JPMorgan, T. Rowe and many others continue to pour resources into the field, we expect active ETFs to increase their market share well beyond the current single-digit allocation. Active ETFs have about USD417 billion under management, while passive assets are around USD6.7 trillion. Passive took in USD105 billion this year through the beginning of June, and active reached USD44 billion.”

According to BI, this dominance of active ETF flows in 2023 is specifically about equity and is less stark among fixed-income funds. Active equity ETFs have taken in USD36 billion this year, notes BI, equating to over 56 per cent of the flows into just equity exchange-traded funds. Active equity ETFs have USD234.4 billion in assets and account for only 4.4 per cent of the total.

James Seyffart, BI ETF Analyst, says: “Active fixed-income ETFs essentially are punching at their weight because they have a much higher proportion of assets: 10.6 per cent vs. 4.4 per cent for active equity. Meanwhile, active fixed-income ETFs have taken in about 9 per cent of bond ETF flows in 2023. Active bond ETFs are still having a good year, yet passive bond funds are especially strong, taking in over USD75 billion. That exceeds the USD65 billion for all equity ETFs this year as of the beginning of June. Active fixed-income ETFs have USD149 billion in assets and have taken in USD8.5 billion. Passive bond ETFs have about USD1.25 trillion in assets.”

BI reports that active ETFs charging 40 bps or less make up 25 per cent of the products but 67 per cent of the assets and 95 per cent of flows. 

Seyffart adds:“Active ETFs have taken in 31 per cent of net flows this year and collected 14 per cent last year – a sharp reversal from their history of barely moving the needle. Every year was supposed to be the “Year of Active” but the category never lived up to it flow-wise, apart from some moderate success on the fixed-income side. Active wasn’t competitive on the cost front compared with passive and smart beta, which is essentially active but rules-based and cheaper. Recently though, companies such as DFA, Avantis, Capital Group and JPMorgan have offered discretionary active for under 40 bps, which is more appealing to both in-house and external advisers and close to smart beta.”

Last month ETF Express reported on the launch of active ETFs in the US by BlackRock where BlackRock claimed active ETFs currently have USD402 billion in assets under management. 

BlackRock launches active ETFs in the US

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