Royal London, M&G Enter European Active ETFs
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Active ETFs Gain Traction as Traditional Fund Managers Respond to Market Shift
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European asset managers Royal London Asset Management and M&G Investments are preparing to launch actively managed exchange-traded funds (ETFs), signaling a growing trend among traditional fund houses to compete with the rising popularity of passive investment vehicles. This move follows similar steps taken by Schroders and Jupiter Asset Management.
The Rise of Active ETFs
Active ETFs, which aim to outperform market benchmarks through strategic investment decisions, are gaining ground as investors seek alternatives to traditional mutual funds and passively managed ETFs. The appeal lies in combining the cost-effectiveness and trading versatility of ETFs with the potential for higher returns offered by active management.
Royal London and M&G are focusing on different asset classes. Royal London will offer ETFs investing in global equities and high-quality corporate bonds, while M&G’s plans haven’t been publicly detailed as of February 29, 2024. Schroders launched its active ETFs earlier, emphasizing the combination of ETF accessibility with the expertise of their fund managers.
| Year | AUM (USD Trillions) |
|---|---|
| 2010 | 0.8 |
| 2015 | 2.2 |
| 2020 | 7.1 |
| 2023 | 9.3 |
Competitive Pressures and Asset Cannibalization
Jupiter Asset Management’s entry into the active ETF space at the beginning of 2024 with a global government bond active ETF highlights the growing concern among traditional asset managers about losing assets to ETFs. Matthew Beesley, Jupiter’s chief executive, warned that inaction could lead to “cannibalisation” of assets held in traditional funds. (Financial Times, date of article not specified in source, but referenced in context of early 2024).
The key difference between traditional mutual funds and ETFs lies in their pricing and trading mechanisms. Mutual funds are typically priced once a day based on net asset value (NAV), while ETFs trade on exchanges throughout the day, offering greater liquidity and price transparency.
Schroder’s Strategy and the Appeal of Active Management
Schroders is positioning its