Advancing the possibilities of ETFs
Introduction to ETFs
An Exchange-Traded Fund (ETF) is an investment wrapper which combines the benefits of a fund and a stock.
A fund offers:
A stock offers:
The structure of the ETF wrapper provides greater opportunity for improved economics.
ETFs offer more liquidity than meets the eye.
What are active ETFs?
When looking at active ETFs, it is first important to note that terms such as “ETF”, “passive” and “index” are not synonymous. ETF simply means Exchange-Traded Fund, which means an ETF is traded at an exchange regardless of the investment strategy used.
A variety of “engines” or strategies can therefore be placed in the ETF structure to leverage its benefits.
“Active” refers to specific investment decisions, which are designed to achieve specific outcomes, such as outperforming an index (Alpha), generating income, or achieving control in terms of duration, yield or credit quality.
An active ETF provides access to these specific outcomes, all while maintaining the attributes of the ETF structure.
The ETF is just a wrapper and the content itself is independent of the vehicle
Active ETFs overview
Why invest in active ETFs?
Active ETFs offer the same benefits of the ETF wrapper as passive ETFs. Active ETFs are cost effective, offer daily holdings transparency, can be traded throughout the day at a known price and offer access to virtually every market worldwide.
Additionally, active ETFs bring expert research and security selection to ETF investors. Active security selection can identify dislocations in the market and focus on alpha generation.
Adding active ETFs to an ETF allocation also brings diversification benefits – in terms of the ETF providers themselves and with regards to the sources of return within a portfolio.
Traditionally it has been more expensive to access active research capabilities and strategies in the mutual fund wrapper.
Demand for active ETFs
Active ETF assets have grown sharply in recent years. At the end of 2017 the global assets under management were only at $58bn US dollar, growing to $565bn US dollar end of 2023.1
ETFs in investors’ portfolios
The share of active ETFs in investors’ portfolios has risen steadily over the past five years. According to the Trackinsight Global ETF Survey 2023, which has insights from over 500 ETF buyers globally, nearly 70% of these investors now use active ETFs in their portfolios, while 12% have an active ETF allocation that is more than 40% of their total assets.
ETF growth
Active management in an ETF wrapper is one of the factors that will drive further ETF growth, as active ETFs provide investors with the opportunity to earn alpha on their investments and retain all the benefits that they expect from the ETF structure.
1 Bloomberg; Data as of 29 December 2023, US & UCITS only.
Getting to know an active ETF
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Active ETFs investing: four myths debunked
Demand for Exchange-Traded Funds has grown rapidly in recent years. Check out myths debunked.
ETF Liquidity: best practices for efficient trade execution
ETFs offer many benefits to investors, including flexible intraday trading, efficient market access and potentially lower costs.
A leader in ETF investing
At J.P. Morgan, we’re combining the built-in benefits of ETFs with our best-in-class research insights, portfolio expertise and trading capabilities.
Expertise
Bringing decades of portfolio management expertise to a variety of ETFs with over $120 billion in AUM globally1.
Innovation
Offering a growing suite of ETFs, with a focus on active solutions, that span all major asset classes and regions.
Success
A long history of solving investor needs across changing markets.
1 J.P. Morgan Asset Management, as of March 31, 2024.
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