Observations from client conversations
Clients tend to approach the active ETF due diligence process in two ways, either from the perspective of a passive ETF research team, or from the perspective of an active mutual fund research team. Both approaches make sense, but due to the background of these research teams there are a few crucial factors specific to active ETFs that will need to be focused on.
If passive ETF research teams have not previously reviewed active strategies, it might make sense to partner with their active research counterparts for mutual funds and benefit from their experience in the active space.
If active mutual fund research teams oversee the due diligence, it makes sense to pay attention to specific ETF-related topics, such as spreads, liquidity or potential tax benefits.
As one of the largest active ETF providers globally, our experience suggests that the due diligence process is usually most effective if it’s driven by an active research team with broad input from passive ETF specialists.
Active ETF due diligence: a team effort
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