Assets under management are on the rise, new funds are being created, and new providers are entering the active ETFs segment, with ETFs with a five-year record performing well, says rating agency Scope.
Scope says growth in the active ETF market segment in Germany has been rapid in the past year, with assets under management (AuM) of around EUR42 billion at end August, more than 60 per cent higher than just over a year ago when AuM stood at EUR26 billion at end June.
Scope writes that active ETFs aim to outperform rather than replicate the performance of a benchmark index but with the help of flexible portfolio adjustments. “These ETFs combine the advantages of traditional active funds, offering the chance of outperformance, with the benefits of ETFs, such as low costs, high transparency and continuous tradability. The products are already a success in the US, but in Europe they make up a small proportion of overall ETF assets.”
In its latest study, Scope analysed all active ETFs available in Germany: a total of 97 products, including 52 for equities, 34 for bonds, nine multi-asset funds and two from other peer groups. Since the last Scope market survey on active ETFs in September 2023, 17 new funds have been launched and the number of providers has increased to 19 from 12.
The firm writes that the market segment includes established providers of actively managed funds such as PIMCO, Fidelity and JP Morgan as well as pure ETF houses such as Ossiam, VanEck and First Trust. New players in the past 14 months include BNP Paribas and EQ IQ (ARK). Other companies plan to enter the market, such as Robeco, (see story: Robeco launches its first active ETFs in European market), Jupiter, Janus Henderson and Avantis (American Century). Scope expects more providers to join the fray as active ETFs become a more important part of the funds sector.
Certain providers dominate the market
The concentration of assets under management in just a few companies is striking, Scope says. Last year’s top firm, JP Morgan AM, which accounted for around a third of the assets of active ETFs as at the end of June 2023, was able to expand its dominance in 2024 and consolidate its first place with a market share of 53 per cent, the firm says. Amundi, Fidelity and PIMCO occupy second to fourth places, all with AuM of around EUR10-11 billion.
There are remarkable differences in terms of volumes, the firm says. Although the average assets per fund stand at more than EUR500 million, the median is only EUR 62 million. Of the 97 products, only 46 exceed EUR100 million – a significant level for investors. One of the results from last year’s study remains valid, Scope says. Most of the low-volume funds do not yet have a five-year record required by many investors, which is generally defined as a “full market cycle” in the financial industry.
For now, the active ETF segment is a “winners take all” market. The 10 largest products each have a volume of almost EUR1 billion or more and account for almost three quarters of the assets managed by active ETFs with an aggregated volume of almost EUR31 billion.
Established products are in good shape
The trend of the segment’s convincing performance continues, Scope says. Of the now 22 active ETFs that have a record of at least five years and a Scope rating, more than half (12) have a top rating of (A) or (B), while none is classified with the weakest rating (E). Across the board, active ETFs are turning in a clearly above-average performance within their peer groups.
Proven products are becoming increasingly attractive to investors, Scope says, especially institutional clients and self-directed investors, because the opportunity for outperformance is combined with low costs. However, the lack of front-end load fees and trailer fees for financial advisers on active ETFs continue to be a stumbling block for broad-based distribution. In this context, the reluctance of bank and insurance company fund providers, most of which are yet to launch active ETFs, is striking, the firm says.
