Launches of actively managed exchange-traded vehicles are surging, but their performance is often poor
Published On Oct 15, 2024, 6:00 AM
The article discusses the recent shifts in the ETF market, highlighting a significant increase in both the growth and launch of active ETFs, while also pointing out their underwhelming performance compared to passive ETFs. The increase in active ETF launches, which now outnumber passive ones significantly, comes despite the historical trend where active management often underperformed relative to passive counterparts. Leading asset management firms like BlackRock, Vanguard, and State Street dominate the market with their low-cost passive products. This trend creates a competitive challenge for midsize managers and highlights the importance of cost efficiency in ETF selection for investors. The article emphasizes the need for investors to be cautious with complex active strategies that may not offer substantial benefits over passive investing.
Stock Forecasts
BLK
Negative
The increasing trend of active ETF launches suggests a potential shift in investor interest, but many of these products lack competitive performance compared to traditional passive options. Therefore, while some active ETFs may offer strong niche strategies, overall, they may struggle to gain traction in a market that favors low-cost passive investing. This dynamic could negatively impact the stocks of major asset managers if they fail to differentiate themselves effectively within this space.
STT
Neutral
As a leading player in the asset management industry, BlackRock has seen its assets soar due to its passive ETF offerings. However, as more active ETFs are introduced, investors may be swayed by higher fee structures without matching performance, which could squeeze margins for companies like BlackRock amid the shift. Long-term growth in passive management, however, suggests underlying strength in its core business.
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