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Goldman Sachs Asset Management is aiming to become a “leading provider” of active exchange traded funds in Europe as fund groups including JPMorgan, Schroders and Jupiter prepare to expand across the market.
Hilary Lopez, head of third-party wealth of Emea at Goldman Sachs Asset Management, said there was “significant interest and demand” from wealth managers and private banks for active ETFs in Europe.
“We have invested substantially into our ETF resources in this region,” she added, noting that GSAM plans to launch another range of active ETFs over coming months. “We see a significant opportunity in active ETFs. Our aim is to be a leading active ETF provider in Europe.”
Shares in ETFs trade on stock exchanges, meaning investors can access live prices throughout the day. ETFs typically follow an index, such as the FTSE 100 or S&P 500, up or down.
They have surged in popularity over the past decade, in part due to their low fees. BlackRock and Vanguard have led the charge, with the ETF market globally growing to $13.8tn.
But so-called active ETFs attempt to beat the index, because fund managers are able to select certain stocks or bonds and exclude others.
In the past week, Jupiter has entered the active ETF market, while Schroders revealed on Friday that it had filed to offer active ETFs across Europe.
“What I know from our client engagement is there is significant interest and demand in active ETFs,” Lopez said.
“It’s early days in Europe, but what we noticed last year was record inflows in this region. We could easily see those flows doubling over the next two years.” Many of these active ETFs will also become available on investment sites, such as Hargreaves Lansdown, sources said.
However, the European market is small, with about $50bn in assets under management.
Analysts are sceptical about the benefits that active ETFs provide to investors and note that the product is another way for fund groups to repackage traditional mutual funds, many of which have suffered from customer withdrawals.
Kenneth Lamont, principal at Morningstar, said the “surge into active ETFs seems driven more by fear of missing out than by any distinct advantage of the ETF structure, while the benefits for investors remain modest”.
“For many asset managers, active ETFs offer a way to leverage in-house expertise or repackage existing strategies to attract new investors through fresh distribution channels.”
Lamont noted that the European active ETF market remains less than 0.5 per cent of the broader European fund market.
“In the US, active ETFs have flourished in part due to their tax advantages over traditional mutual funds — a benefit that does not extend to Europe,” he added.
Matthew Beesley, chief executive of Jupiter, told the Financial Times that “the risk is that if you sit there and don’t do anything, ETFs will continue to cannibalise the assets held in traditional funds.”
Traditional mutual funds have lost money to ETFs, as investors have opted for the lower-cost products. According to funds network Calastone, retail investors withdrew £1bn from UK equity mutual funds in January.
Asset managers remain bullish and are allocating more resources to growing in the active ETF space. Research by Janus Henderson suggests the active ETF market in Europe could grow to more than $1tn by 2030.
Bryon Lake, chief transformation officer at Goldman Sachs Asset Management, said that Europe will probably “follow a similar pattern to the US” in terms of growth, noting that “it’s not a stretch to say active ETFs will grow at a fast rate”.
According to Morningstar, flows into European active ETFs amounted to €7.3bn in the last few months of 2024, compared with about €70bn for traditional passive ETFs.