After years of marketing actively managed exchanged-traded funds to institutional investors to no avail, money managers believe they're finally at a tipping point.
Not only have managers like Pacific Investment Management Co. LLC and State Street Global Advisors seen their active ETF assets grow over the past year, but with Fidelity Investments and Vanguard Group Inc. now looking to get into the game, it appears as though these once niche vehicles might soon gain acceptance from institutions.
Natalie J. Zahradnik, executive vice president and ETF strategist in PIMCO's Newport Beach, Calif., office, said in a phone interview that her firm has seen “an increased interest and acceptance among institutional investors” in active ETFs.
PIMCO is now the largest purveyor of active ETFs; it reported $7.8 billion in active ETF assets in the U.S. as of June 30, up 8.3% from Dec. 31. PIMCO has 13 active ETFs, seven in the U.S. and six in Europe.
Looking ahead, Ms. Zahradnik said she expects “an increased adoption” of active ETFs among institutional investors.
Data from Morningstar Inc. show that actively managed U.S. ETFs had $26.17 billion in assets as of June 30, up 32% in a year.
Institutional investors and money managers alike have been skeptical about allocating money to — or providing — active ETFs. Asset owners seeking active management have historically been able to exercise significant discretion on price and strategy through commingled vehicles or separate accounts. And a Securities and Exchange Commission requirement that active ETFs provide daily transparency has also stalled widespread adoption.