[ I N D E P T H | E T F s ]
Active ETFs :
Europe has a way to go
As Europe is yet to see the significant uptake in actively managed ETFs that the US market has experienced , Annabel Smith asks why that is and how active ETFs operate .
Global markets have seen a steady uptake in the number of exchange traded funds ( ETFs ) in the last eight years .
They , among other index tracking investment vehicles , have become popular in this increasingly passive era , as the market continues to question whether active investment can outperform passive strategies that , in some cases , cost investors half as much in fees .
Similar to a mutual fund in that they typically track an index , ETFs differ from other passive instruments as they allow a basket of stocks to be traded in one transaction on an exchange . Unlike mutual funds , ETFs also offer intra-day access to liquidity . This can minimise risk and transaction costs , while allowing traders to gain price discovery with low information leakage .
In Europe alone over the last eight years , ETFs have grown at an annualised rate of 20 % in terms of assets under management ( AUM ) with over $ 1 trillion of notional now held in European listed ETFs .
Chief among the reasons behind the steady uptake in ETFs is the continuous compression of margins in the asset management industry as investors increasingly expect more for their money and
64 // TheTRADE // Spring 2021