cnbc.com
Actively Managed ETFs Surpass \$1 Trillion in AUM
Actively managed ETFs' assets under management (AUM) surpassed \$1 trillion in 2024, fueled by SEC rule changes and RIA adoption, primarily in the U.S., despite higher management fees compared to passive ETFs (0.63% vs 0.44%).
- How do regulatory changes and the role of Registered Investment Advisors (RIAs) contribute to the growth of active ETFs?
- The growth of active ETFs is linked to the SEC's 2019 rule changes, which simplified the approval process, leading to increased accessibility and higher AUM. The higher management fees (0.63% vs 0.44% for index ETFs) are offset by the potential for higher returns and the flexibility active management offers, particularly in uncertain economic environments. Registered Investment Advisors (RIAs) are key drivers of this growth, accounting for 41% of US active ETF assets.
- What factors drove the significant increase in actively managed ETF assets under management in 2024, exceeding \$1 trillion?
- In 2024, actively managed ETFs surpassed \$1 trillion in assets under management (AUM), a fivefold increase over their passive counterparts. This surge is largely attributed to the SEC's 2019 rule changes, streamlining the ETF launch process. The U.S. dominates this market, with 81.27% of global active ETF assets.
- What are the potential limitations to the future global expansion of actively managed ETFs, considering geographical disparities and cost factors?
- While equity ETFs currently dominate, fixed-income active ETFs are poised for growth due to the perceived inefficiency of fixed-income markets and investor demand for active strategies in uncertain times. However, limited regulatory frameworks and higher costs in countries outside the U.S. could hinder global expansion. The dominance of U.S. RIAs also suggests future growth may be geographically concentrated.
Cognitive Concepts
Framing Bias
The article's framing is overwhelmingly positive towards the growth of active ETFs. The headline and introduction emphasize the record-breaking AUM figures and rapid growth, setting a tone of optimism. The inclusion of quotes from industry experts further reinforces this positive perspective. While negative aspects like higher fees are mentioned, they're presented almost as minor details compared to the dominant narrative of success. This positive framing might create an overly optimistic view of active ETF investment, potentially neglecting important risks.
Language Bias
The language used is generally neutral, although phrases like "piled into" and "surge in popularity" carry slightly positive connotations. The repeated emphasis on "growth" and "record-breaking" figures reinforces the optimistic tone. However, the use of specific numbers and data helps to maintain objectivity. Overall, the language is largely unbiased but has a slightly positive slant.
Bias by Omission
The article focuses heavily on the growth and benefits of active ETFs in the US market, particularly the role of the SEC rule changes. However, it omits discussion of potential drawbacks or criticisms of active ETFs, such as higher expense ratios compared to passive funds, and the potential for underperformance relative to the market. It also lacks a global perspective beyond noting that the US dominates the market and that active ETFs are a 'nascent' category elsewhere. This limited perspective might mislead readers into believing active ETFs are universally successful and widely adopted.
False Dichotomy
The article presents a somewhat simplistic view of the active vs. passive ETF debate, focusing primarily on the recent surge in actively managed funds. While acknowledging that passive ETFs are more common, it doesn't fully explore the nuances of when an active or passive strategy might be more suitable for different investor profiles or market conditions. This could lead readers to assume active management is inherently superior.
Sustainable Development Goals
The growth of actively managed ETFs, while benefiting from higher management fees, could potentially lead to increased investment opportunities and returns for a wider range of investors, thus contributing to reduced inequality if the returns are distributed more equitably. However, this is contingent on the accessibility of these investments and the equitable distribution of benefits. The higher fees could also exacerbate inequality if access is limited to wealthier individuals.