HANetf founder and co-CEO discusses shift to active management in ETF market
London, UK
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March 21, 2024 11:40 AM Eastern Daylight Time
HANetf founder and co-CEO Hector McNeil tells Proactive's Stephen Gunnion about shifting trends in the exchange-traded fund (ETF) market in the United States, indicating a big move towards active management within ETFs.
Despite the European market lagging behind the US by three to five years, with a significant gap in market size—$2 trillion in Europe versus $8 trillion in the US—there is a notable increase in the proportion of active ETFs.
In the US, approximately 75% of new ETFs are active, issued by major firms and new players like Ark's Cathy Wood, marking a significant growth area. This shift towards active ETFs is also reflected in the flow of investments, with active ETFs accounting for 25% of the flows over the last 18 months.
McNeil highlighted the evolution of ETFs from passive instruments to including smart beta and now fully active management, especially within the fixed income sector. The trend towards transparency, despite initial concerns, has become more accepted, leading to increased interest from asset managers in active ETFs. He said HANetf's white label ETF service has seen a rise in enquiries from active managers, indicating a broader acceptance and integration of active strategies within the ETF framework.
Examples of strategies for these new active ETFs range from global equity with specific screens, like Shariah compliance, to niche areas such as convertible bonds and thematic investments. The discussion also touched on defined outcome ETFs and options-based strategies, showcasing the diversity and innovation within the ETF space.
McNeil argues that ETFs offer advantages over mutual funds in terms of technology, liquidity, and access, suggesting a continued shift towards ETFs for a variety of investment strategies.
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