The Australian exchange-traded fund (ETF) industry is on the brink of significant growth going forward, driven by the anticipation of active ETFs set to emerge in the marketplace, according to the president of a Canadian ETF manager.
“The Australian ETF industry has a huge growth profile,” Horizons ETF Management president Howard Atkinson said at the Australian Securities Exchange ETF Conference in Sydney yesterday.
“Active ETFs will be the major driver of long-term asset growth for the ETF space – it will hit this market in the not too distant future.”
ETF assets have been growing overseas despite the low markets, painting a very strong picture for the industry’s future, Atkinson said
“Actively managed ETFs are the real game changer.
“Where you draw the line on what’s active and what’s passive, that’s debatable but it really doesn’t matter. The whole idea of trying to outperform benchmarks is active management and that’s where ETFs are going.”
Research by forecasting agency McKinsey & Co said United States active ETFs will reach $1 trillion in assets under management in the North American marketplace within the decade.
“Actively managed ETFs are a sliver of the market today, whether you’re in Canada or the United States but going forward, they believe that actively managed ETFs will hit $1 trillion within the decade – and that’s their mid-case scenario,” Atkinson said.
“The indexing crowd will tell you that active management is dead but that’s not the case. The vast majority of assets out there are actively managed but the problem for many investors is that it’s just too expensive.”
The Canadian market is a far more relevant comparison for the Australian market due to the similarities in demographics, indices and the financial services industry, Atkinson said.
“Looking at Canada is like looking at the future of the Australian ETF industry, he said.
Canadian financial advisers have been the largest distribution network for actively managed ETFs, he said.
“It does tend to align with advisers who like to use active management for the most part but many do a mix of active and passive, of course.”
Regulatory trends and product innovation will create great opportunities for the ETF industry, rather than discourage growth.
Furthermore, increased scrutiny of ETFs by regulators is positive as it will increase investor confidence and usage, he said.
