Strategic Expansion into Active ETF Market
Two of Britain’s largest asset management firms, Royal London Asset Management and M&G, are making strategic moves to capture market share in Europe’s rapidly expanding active exchange-traded fund (ETF) sector. This development comes as traditional mutual funds face increasing fee pressure and investors seek more flexible, cost-effective investment vehicles.
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Hans Georgeson, chief executive of RLAM, revealed to the Financial Times that the £184 billion group plans to establish a Dublin office within 18 months to facilitate its international expansion and active ETF market entry. “The active ETF market is moving very fast,” Georgeson stated. “We plan to enter in the top 10. We are very ambitious in the active ETF space. We will probably launch with both equity and fixed income.”
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Understanding the Active ETF Advantage
Active ETFs represent a significant evolution in investment products, combining the potential for outperformance of traditional active management with the operational efficiency and accessibility of ETFs. Unlike their passive counterparts that simply track market indices, active ETFs enable fund managers to employ strategies aimed at beating benchmarks like the FTSE 100 while offering investors lower costs and greater liquidity.
The flexibility of these instruments represents significant industry developments that are reshaping how capital allocators approach portfolio construction. As Georgeson noted, “ETFs are more accessible internationally. It’s a key plank for passporting internationally.”
Explosive Market Growth Metrics
Recent data from Goldman Sachs’ fund arm underscores the remarkable expansion of Europe’s active ETF industry. Assets under management have surged nearly sevenfold since 2019, reaching €68.6 billion. The number of funds and providers has followed a similar upward trajectory, with active ETF launches outpacing passive launches for the first time in the market’s history.
This growth reflects broader market trends toward more efficient, transparent investment vehicles that appeal to both institutional and retail investors seeking enhanced accessibility and cost efficiency.
Competitive Landscape Intensifies
M&G is preparing to launch its first active ETFs within weeks, with initial products focusing on UK government bonds and US Treasuries. Neil Godfrey, global head of client group at M&G Investments, emphasized the strategic importance of this move: “These ETFs will open up possible new investor audiences and potentially expand our partnerships with our existing investor base.”
Other established fund managers have already entered the fray. Schroders unveiled its first European active ETFs last month, targeting global equities and high-quality corporate bonds. Johanna Kyrklund, Schroders group chief investment officer, highlighted how these products combine ETF flexibility with the firm’s active management expertise.
Jupiter joined the sector earlier this year with a global government bond active ETF. CEO Matthew Beesley articulated the competitive imperative driving these moves: “The risk is that if you sit there and don’t do anything, ETFs will continue to cannibalise the assets held in traditional funds.”
Technological Infrastructure Implications
The shift toward active ETFs requires sophisticated technological infrastructure to support real-time pricing and trading capabilities. Unlike traditional mutual funds, which price once daily, ETFs trade on exchanges with continuous pricing throughout the trading day. This demands robust systems capable of handling complex related innovations in financial technology and data processing.
As asset managers navigate these technological requirements, they’re also monitoring recent technology and regulatory developments that could impact their operational frameworks and compliance requirements.
Future Outlook and Strategic Positioning
The entry of major players like Royal London and M&G signals a maturation of Europe’s active ETF market and suggests continued robust growth ahead. Godfrey of M&G noted the natural evolution in client preferences: “Given many clients already use and have familiarity with ETFs, we see a natural evolution towards active solutions, which will provide new opportunities to engage with capital allocators and their advisers across the UK, Europe and Asia.”
This strategic pivot reflects how financial institutions are adapting to changing investor preferences, much like how industry developments in other sectors are responding to technological disruption and evolving consumer expectations.
The active ETF revolution represents more than just product innovation – it signifies a fundamental shift in how investment management services are packaged, distributed, and consumed in an increasingly digital and cost-conscious financial landscape.
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