Current State Of Active ETFs

One of the biggest growth areas in the industry is going to see another boost.

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Reviewed by: Todd Rosenbluth
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Edited by: Todd Rosenbluth

The actively managed ETF landscape is likely to look very different a year from now, with deep-pocketed and well-known asset managers preparing to launch new equity products with the introduction of nontransparent active ETFs in 2019.

But just over 10 years after the largest actively managed ETF, the PIMCO Enhanced Short Maturity Active ETF (MINT), came to market, the current active ETF leaderboard consists of many firms that also have a strong index-based presence.

According to First Bridge Data, a CFRA company, there are nearly 70 ETF providers offering a total of more than 320 actively managed ETFs. Yet the approximately $100 billion in assets for all actively managed ETFs is concentrated at a handful of firms. Meanwhile, the success these firms have achieved has generally been concentrated in one fixed income ETF, despite offering a broader suite.

Minting Assets

For example, PIMCO’s ultra-short broad-market-focused MINT has $14 billion in assets. This represents 78% of the firm’s $17 billion in actively managed ETF assets, even as it also offers a strong core offering in the PIMCO Active Bond ETF (BOND). The firm recently launched the PIMCO Enhanced Short Maturity Active ESG ETF (EMNT).

Meanwhile, the $10 billion JPMorgan Ultra-Short Income ETF (JPST) was an even larger 90% share of J.P. Morgan’s $11 billion active ETF suite. The firm has been building out its active alternatives and bond fund lineup the last few years with the JPMorgan Diversified Alternatives ETF (JPHF) and the JPMorgan Ultra-Short Municipal Income (JMST), but these funds have not garnered as much interest.

J.P. Morgan has plans to offer nontransparent actively managed equity ETFs, licensing the recently approved Precidian structure, and we think these could launch in 2020.

(Using the Precidian structure, asset managers will be able to offer actively managed equity ETFs without being required to disclose holdings on a daily basis, as is the norm for ETFs.)

iShares: 4th Biggest Active ETF Issuer

BlackRock’s iShares is the overall ETF industry market share leader, led by its index-based suite, and is also is the fourth largest active management provider, aided by the $6.5 billion iShares Short Maturity Bond ETF (NEAR).

NEAR was 65% of the firm’s active ETF assets. The firm has launched fully transparent actively managed equity ETFs, but there has been a slow ramp-up in assets for the $65 million smart beta ETF BlackRock U.S. Equity Factor Rotation (DYNF)—which rotates between quality, value and other factors—and the non-GICS-sector-oriented iShares Evolved U.S. Technology ETF (IETC)

 

SponsorSponsor AUM ($M)Largest Active ETFTop ETF % of Assets
First Trust24,831FTSM20%
PIMCO17,443MINT78%
JPMorgan Chase11,247JPST90%
Blackrock (iShares)9,949NEAR65%
State Street (SPDR)6,772TOTL49%
Invesco5,065GSY54%
ARK Funds3,018ARKK60%
Franklin Templeton1,895FLCB49%
Innovator Management1,701POCT18%
Fidelity1,340FBND67%
Principal Financial Services1,318GDVD60%
Janus1,227VNLA85%
Hartford Funds985HTRB64%
PGIM Investments906PULS89%
Davis Advisors757DWLD32%

 

Source: First Bridge Data, a CFRA company, as of 12/13/2019

Fidelity & First Trust

CFRA also thinks Fidelity is an interesting firm in this space given its strong active brand. Fidelity recently received approval to use its nontransparent ETF structure to launch active equity ETFs.

The firm manages four active bond ETFs; the largest is the $900 million Fidelity Total Bond (FBND). This ETF was two-thirds of the firm’s active ETF business, though that too could change in 2020.

First Trust is a rarity among the top active ETF providers. The firm’s $25 billion active ETF presence is well diversified with its largest offering, the First Trust Enhanced Short Maturity ETF (FTSM), representing just 20% of active fund assets.

The firm has seven other active ETFs with $1 billion or more in assets, including the First Trust Preferred Securities & Income (FPE) and the First Trust North American Energy Infrastructure Fund (EMLP).

Billionaire Club

At $2.7 billion in assets, EMLP is just one of two active equity ETFs to manage $1 billion in assets, with the ARK Innovation ETF (ARKK), offered by ARK Funds, being the other one. However, more active equity ETFs are on the way.

Firms like Fidelity, J.P. Morgan, American Century, T. Rowe Price and others have a good chance to tap into their existing active equity expertise and be able to duplicate the success the ETF industry has experienced with active fixed income funds.

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of the analyst's compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For more information, please refer to CFRA's Legal Notice at https://www.cfraresearch.com/legal/.

 

 

 

Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence’s equity and fund business in October 2016. Follow him at @ToddCFRA.