Active ETF Asset Traction Quickens

The ETF Think Tank is a community of advisors focused on a client-centric approach to investing through the use of ETFs. Each week, we disseminate research on the growth of the ETF industry, including key performance indicators (KPIs) on number of ETFs listed, assets, revenue, exchange market share and number of issuers. This data is useful in serving to monitor the trends in the ETF ecosystem. ETF Think Tank produces this monthly report for ETF.com.

US ETF Asset Growth

Market sentiment is positive, and it is clear that the ETF evolution in this future decade will gather trillions more dollars faster than in the prior decade.

Having said that, assets under management in January closed at $4.5 trillion, up slightly from year-end Dec. 31, 2019.     

Open-To-Close Ratio

In January, the number of ETFs trading in the U.S. declined slightly to 2,298, registering an open-to-close ratio of 1.43 (221/155). Again, we know the 42 Invesco closures that have already been announced that will happen in Q1 will tilt this ratio close to 1. This is just mathematics, not a reflection of the talk of innovation in the air.

To that point, we welcomed five new ETF brands to the brand count, which now totals 146.   

Fixed Income ETF Accelerating

Whether inflows in fixed income eclipsed equity flows in 2019 misses the point. The fact is that ETFs as a wrapper are the modern solution, and asset managers with mutual funds are beginning to embrace the reality that investors already know.

This is important to recognize, because it is arguably a core reason that trillions of dollars are coming into fixed income ETFs over the course of the next decade. As the Investment Company Institute pointed out in its 2019 Factbook, bond funds, as fixed income, are 22% of the $21 trillion combined AUM, which is in line with the 18.86% or $838 billion in ETF AUM.

However, given the efficiencies of the ETF wrapper, transference will happen organically, especially given the generational trends toward ETFs and planning for retirement.

Domestic and global equity ETFs represents 77% of U.S.-listed ETF AUM as of the end of January.

(Note the below chart is used to show where the puck is going, but it is as of 2018; therefore, dollar values are probably larger and percentages within the range.)

Revenue From Active ETFs Eclipse 6%

Active is alive and well in the ETF marketplace, but while it is only 2.31% of total U.S.-listed ETF assets, it is 6.09% of the projected “12 month revenue” metric for ETF issuers, which is pacing at $8.25 billion. Active ETFs represent about $102 billion.

As a baseline, at the end of January, it is noteworthy that there are 280 fully transparent actively managed ETFs, representing 12.18% of the 2,298 U.S.-listed ETFs.

This revenue share number will change dramatically over time with the new active wrapper (nontransparent active) ETFs launches. The revenue number is up from $6.83 billion in December 2018, or about 20.6%.  

As we move into the coming decade, there is a lot of excitement about innovation of the wrapper. It is important to highlight that active ETFs and ETFs that offer different approaches also are gaining traction despite the fact that most of the AUM growth is getting invested in low-cost ETFs.

Contact Dan Weiskopf at [email protected]