Active exchange traded funds (ETFs) are predicted to play a bigger role in portfolios in coming years as more fund managers seek to capitalise on the popularity of ETFs by launching new products.

Australia may be at the vanguard of this trend in Asia Pacific with a PwC analysis showing that active products already make up a quarter of all ETFs in our market – which is more than any other country in the region.

Why it matters: PwC’s analysis shows 83% of global ETF issuers expect financial advisers and intermediaries to be key source of growth over the next five years, which suggests a marketing blitz targeting planners may accompany new products.

State of play: Global ETF assets under management grew by a record 27% to US$14.6 trillion last year and could rise to US$30 trillion by 2029, according to the PwC analysis.

• Over 60 asset managers launched products for the first time in 2024 bringing the total number of ETF and ETP issuers to approximately 690 worldwide – or more than twice as many as a decade ago.
• Active ETFs remain a comparably small part of the overall pie but their assets under management grew by 52% last year to breach the US$1 trillion mark.

Active vs passive: The forecast growth in active ETFs comes despite confirmation from the latest SPIVA scorecard that many fund managers still underperform their passive counterparts¹.

• The SPIVA Australia scorecard includes open-ended managed funds and ETFs. It shows only active funds in the Australian Bonds and Australian Equity Mid-and Small-Cap categories mostly beat their benchmarks in 2024.
• By contrast, 85% of managers in the Global Equity General category failed to beat the relevant index. Australia Equity General funds did relatively better with just over half underperforming their benchmark.

Watch this space: It may be that more active ETFs fall outside these traditional categories in years to come. Bloomberg reported last month that US providers were already capturing inflows for products ranging from vanilla investors to structured credit, crypto, leveraged stock trades and derivative-powered strategies.

• PwC earmarked recent offshore launches of active ETFs for private credit, private equity and collateralised loan obligations as harbingers of the type of innovation that may come in the market.

1. S&P Dow Jones SPIVA Australia Scorecard (Year end 2024)

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