Making Sense Trading Insights: Evolution of the US ETF market
Sep 17, 2024
Chris Andrew, Head of Market Structure and Regulatory Change at J.P. Morgan, opens up about the explosive growth of the US ETF market and how retail investors are shaping its future. He discusses the remarkable shift from mutual funds to specialized ETFs, highlighting that ETFs now account for 30% of trading activity. The podcast also delves into the intriguing rise of actively managed ETFs and the blend of active and passive strategies. Additionally, Andrew addresses challenges in the European market and the potential for industry reforms.
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Issuers Chase Niche And Active Strategies
- Issuers compete by creating specialised and underserved exposures rather than displacing core index ETFs.
- Two-thirds of newly issued ETFs in the last 2.5 years have been actively managed products.
Active ETFs Use Manager Discretion
- Actively managed ETFs give managers discretion instead of tracking a fixed index and aim to outperform benchmarks.
- This represents a clear evolution from ETFs' original passive tracking ethos.
Quasi‑Active ETFs Blur Lines
- Many ETFs are rule-based but target sophisticated exposures with frequent rebalancing, blurring passive and active lines.
- Issuers may create bespoke indices to deliver technical exposures without manager discretion.