Active ETFs in Germany managed 119 billion euros at the end of August. Assets have almost doubled compared to the previous year, and the number of products increased from 183 to 345.
According to industry experts, the retirement savings account, which will be subsidized by the state with up to 540 euros from the turn of the year, could further accelerate the growth of active ETFs.
Around half of the fund providers surveyed want to use active ETFs for their standard product.
With annual expense ratios of 0.27 to 0.42 percent, active ETFs lie between the fees of passive ETFs and traditional mutual funds.
Frankfurt. The asset management company Pictet has also been offering ETFs in Europe since the summer. The house is actually known for classic active portfolio management. The new funds are traded on the stock exchange, but unlike most ETFs, they do not strictly follow an index. Instead, an AI model looks for promising stocks with the aim of generating more returns.
Pictet is far from alone with such so-called active ETFs. This year, Allianz Global Investors, the Berlin tech investor BIT Capital and the investment manager Alliance Bernstein have also launched corresponding products.
Active ETFs remain a niche in the European fund market, but are growing quickly: products available in Germany managed 119 billion euros at the end of August - almost twice as much as twelve months earlier, when it was 63 billion euros. The number of products increased from 183 to 345 in the same period.
This emerges from an evaluation by the analysis houses Scope Fund Analysis and Fondsconsult, which is available to Handelsblatt in advance. Now the retirement savings account could continue to drive growth.
Active ETFs are exchange-traded funds that deliberately deviate from their underlying benchmark index. How exactly they do this varies significantly depending on the product. Compared to traditional active investment funds, they are usually cheaper, can be traded continuously on the stock exchange and usually publish their portfolios daily.
Industry hopes for retirement savings
According to industry observers, active ETFs with retirement savings accounts could continue to gain in importance from the turn of the year. With the reform of private pension provision, the state will subsidize investments on the capital market from January with up to 540 euros per saver per year. Each provider must also provide a simple standard depository. It consists of two funds and may cost a maximum of one percent annually.
The industry expects enormous inflows. The rating agency S&P expects the reform to generate additional net inflows of between 26 and 56 billion euros annually after an introductory phase. Scope assumes inflows of 30 to 50 billion euros per year in the medium to long term.
For the analysis, Fondsconsult surveyed 33 fund providers about retirement savings accounts. 15 stated that they preferred active ETFs for the standard product. “Many fund providers want to equip standard portfolios with active ETFs,” says Jan Richter, analyst at Fondsconsult. “A large part of the inflows into retirement savings accounts could therefore go into active ETFs.”
Fidelity International relies on active ETFs for its standard portfolio. The cooperative fund company Union Investment, which had long avoided using ETFs, has announced that it will add active ETFs to its standard product. The fund company Acatis, founded by Hendrik Leber, launched its own active retirement portfolio ETF in May.
Scope analyst Florian Koch sees retirement portfolios as a possible “booster” for active ETFs. According to the analysis, providers who are not classic passive ETF houses in particular have the opportunity to participate in the German market for retirement provision products through active ETFs.
Niklas Nolzen, partner at the management consultancy McKinsey, says: “The retirement portfolio could become a growth driver for active ETFs and at the same time increase the pressure on classic active funds.” Active ETFs are “a new, more cost-efficient way of offering active management”.
Price war over fees
Nevertheless, it is still unclear whether standard depots are actually equipped with active ETFs on a large scale and to what extent customers use this, says Richter. According to Nolzen, passive ETFs will initially dominate for particularly inexpensive standard solutions.
In recent weeks, a price war has developed over retirement savings account fees. Active stock ETFs recently had an annual expense ratio of 0.42 percent, as shown by the Scope analysis. For bond ETFs it was 0.27 percent.
Active ETFs are therefore cheaper than many conventional investment funds, but generally more expensive than passive ETFs. According to the ExtraETF platform, the ten largest passive stock ETFs have an average annual cost of around 0.14 percent.
JP Morgan Asset Management, the market leader for active ETFs in Europe, sees opportunities in retirement savings accounts. “Because of the fee limits, ETFs will play a central role in retirement portfolios,” said Travis Spence, who heads the ETF business at JP Morgan Asset Management, recently to the Handelsblatt. The fund provider wants to offer a portfolio of active ETFs for retirement savings accounts together with the fintech Unitplus.
Stefan Kuhn, head of ETF sales for Europe at Fidelity International, expects the majority of new money on the market to flow into passive stock market funds. “Active ETFs, on the other hand, are likely to grow above average from a comparatively low level,” explains Kuhn.
The Scope figures on market volume roughly correspond to current data from the analysis company Morningstar for European active ETFs. Accordingly, active ETFs in Europe - unlike in the USA - remain a niche segment: Three percent of the assets invested in European stock market funds were in active ETFs at the end of September, as Morningstar data shows.
“Compared to the overall market, the volume is still small,” says Scope analyst Koch. However, active ETFs still showed “an enormous growth rate”. Many funds have now reached the important level of 100 million euros.
Is there a market shakeout coming?
How much the funds actually deviate from the market weights of a stock market index and thus from comparable passive ETFs varies. Index-based strategies continue to be particularly popular, according to the analysis. For example, JP Morgan Asset Management worked with the so-called “Research Enhanced” strategies with only small deviations from the benchmark.
Fundconsult analyst Richter therefore recommends investors to take a close look at each product individually: “As the supply increases, selection becomes more important for investors,” he says. In addition, an evaluation by S&P regularly shows that only a few active fund managers beat comparative indices in the long term.
Richter expects the number of active ETFs to continue to grow. However, many products have not yet reached a volume with which they can be operated in the long term. The analyst therefore also says: “Sooner or later there could be a market shakeout.”
