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How to Navigate the Evolving ETF Landscape

How to Navigate the Evolving ETF Landscape

How to Navigate the Evolving ETF Landscape

I am looking forward to a rich program at the Investment Company Institute's Independent Directors Council meeting in Chicago this coming week. Equally, I’d love to learn what is on the minds of fellow directors and industry leaders. On my mind lately were our industry's convergence towards ETFs, and the need to understand ETFs better. Where is the ETF innovation front today? Which new ETFs are gaining market acceptance? What are the causes of poorly-understood ETF costs (such as bid/ask spreads, premium/discounts, etc.)? To learn, I researched and published six ETF studies this year (you may download these InnovationWatch@ETF studies here - bottom of page - https://lnkd.in/eWnUy93c).   --July study: which of the new ETFs (launched since 12/2022) grew fast in 2024?  --June study: ETF Bid/Ask Spreads and the impact of trading volume on such spreads. --May: ETF Bid/Ask Spreads - variability over time and across strategies and AUM scale. --March: ETF Bid/Ask and Premium/Discount spreads: benchmarking and causes.  --February: challenges, reality of mutual fund-to-ETF conversions  --January 2024: New ETF 2023 Innovations, led by many successful, active ETFs Mutual Fund Liquidity and Shareholder Redemption: ·      Another well-received study I published recently focused on the U.S. SEC proposed Liquidity Rule. At the advice of the ICI, a version was posted on the SEC proposal Comment Letter. I also did a Podcast on the reassuring conclusions of this study. (Note: A previous study I wrote about mutual funds and systemic risk in response to regulators concerns was posted on the SEC Comment Letter in 2015.) Happy to share and discuss these studies, as appropriate.

According to a recent survey from etf.com, there’s a growing interest in actively managed ETFs as financial advisors seek diversification beyond passive strategies. The results show active ETFs gaining traction, particularly in equity and fixed-income categories. https://buff.ly/3AGfHrJ

The trouble with trying to mimic PE & VC in an ETF wrapper is that there is little value in creating another avenue for high vol equity exposure and the mark-to-market reality of an ETF undermines the value of volatility-washing offered by these products for allocators. A successful product in this space wont just mimic the economic exposure, but also create the market-to-market smoothing illusion so craved by the allocator community even if it means lower returns. https://lnkd.in/eUDkAShR

ARTICLE: The recent surge in active ETF launches comes for a variety of likely reasons. First is the ability to launch active ETFs more easily and create custom creation/redemption baskets due to updated regulations in recent years. Additionally, the asset-gathering success of several large active ETFs in fixed income, U.S. equity, and derivative strategies has likely led other asset managers to attempt to duplicate their success, or at least rethink their approach to product launches. I also believe investor thinking regarding active versus passive has changed. ETFs are no longer viewed solely as passive index tracking instruments but are widely being accepted as the more efficient investment vehicle.

ARTICLE: The recent surge in active ETF launches comes for a variety of likely reasons. First is the ability to launch active ETFs more easily and create custom creation/redemption baskets due to updated regulations in recent years. Additionally, the asset-gathering success of several large active ETFs in fixed income, U.S. equity, and derivative strategies has likely led other asset managers to attempt to duplicate their success, or at least rethink their approach to product launches. I also believe investor thinking regarding active versus passive has changed. ETFs are no longer viewed solely as passive index tracking instruments but are widely being accepted as the more efficient investment vehicle.

While active ETFs have gained considerable media attention as potential disruptors, questions remain as to how central they will be within investment and wealth management. In this article, Maxime van Baasbank and Diane Yoon discuss the active ETF landscapes across the U.S. and Europe, exploring current market dynamics, key regional nuances, and implications for fund managers. Read more here: https://lnkd.in/erA8mwbi #activeETF #investments #investmentmanagement #wealthmanagement #marketentry #corporatestrategy #ETF #fundmanager