Active ETFs to propel sector growth

This article originally appeared on benefitscanada.com

Actively managed ETFs make up less than 1% of the global ETF market, but a new paper suggests that will soon change.

The SEI paper, “Getting a Grasp on Actively Managed ETFs Before the Boom,” reveals increased interest from pension funds, endowments and other large institutional investors will likely help fuel growth in the active ETF space.

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The benefits — low costs, transparency, liquidity and tax efficiency — also make them attractive to individual investors and investment advisors.

“Recently, there has been positive movement supporting growth in active ETFs, but the historical roadblocks and lengthy SEC approval process have steered both managers and investors away,” says Jay Cipriano, head of traditional solutions for SEI’s investment manager services division.

Read: The intelligent ETF

He adds, “If managers can take advantage of these new positive catalysts, active ETFs may not only fuel the next phase of ETF growth but, over time, may challenge traditional active mutual funds for market share.”

Management consulting firm McKinsey & Company predicts assets in actively managed ETFs will reach US$500 billion by 2020, up from $12.6 billion today.

Also read:

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Surge of active ETFs to come

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Combining ETFs with active management

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.