Professional Investors are increasingly favouring active ETFs over other investment vehicles, according to new findings from Fidelity International’s Professional Investor DNA Survey.
The European ETF market continued its impressive growth in 2024, surpassing USD2 trillion in assets under management for the first time. Despite this, active ETFs remain relatively under-represented. According to Morningstar, active ETFs account for 8 per cent of the overall US ETF market, while in Europe it stands at 3 per cent.
However, significant change is underway, Fidelity writes, as the European active ETF market expanded sharply from USD38 billion to USD64 billion over the past year, as more investors discovered their benefits.
The survey of over 120 institutional investors and intermediary distributors across Europe and Asia, in partnership with Crisil Coalition Greenwich, confirmed that nearly a quarter of professional investors (24 per cent) are already utilising active ETFs.
Demand for active ETFs is expected to increase more rapidly than any other type of investment vehicle over the next 18 months, with 37 per cent of investors surveyed anticipating an increase in their allocations. Intermediary investors show most interest, with 61 per cent anticipating an increase in usage in their portfolios over the next 18 months.
Top reasons for using active ETFs include to reduce costs, to generate alpha, and access to specialist areas.
Alastair Baillie Strong, Global Head of ETFs at Fidelity International comments: “The anticipated growth in investor allocation to active ETFs identified in our survey reflects the evolving preferences of investors. There is growing investor awareness of the benefits of active ETFs; combining the advantages of traditional active funds: flexibility, potential for outperformance; and those of ETFs: lower costs, transparency and ease of access. PWC expects the global ETF market to grow to USD20 trillion in assets under management by 2030, a 17 per cent compound average growth rate, and we anticipate that active ETFs will grow even faster, increasing their share as more investors discover their benefits.
“Our active ETF business is a key growth driver for Fidelity, and at the end of 2024, we were pleased to solidify our position as the second largest active ETF provider in Europe by assets under management (USD6.0 billion) and net new flows (USD2.2 billion).
“Looking ahead, we face a backdrop of ongoing complexities in the market which can be characterised by high valuations and various uncertainty factors. Given this backdrop, ETF selection is more important than ever. At Fidelity, our active ETF strategy is to support our clients as they seek to tackle the many idiosyncratic risks posed by today’s volatile global macroeconomic and geopolitical backdrops, leveraging our long-standing active research capabilities to deliver enhanced diversification and return benefits versus passive ETFs.”
