ETF Stream‘s ETF Buyers Club survey revealed the growing demand for greater transparency in the investment processes of active ETFs.
The survey revealed that over 50% of fund selectors currently use active ETFs, with an additional 8% planning to do so.
Despite the interest, the survey found challenges like limited product range (25%) and tracking error (21%) still hinder wider adoption. In addition, investors specifically call for more clarity on investment processes.
The limited product range of active ETFs is particularly prominent for small cap exposures, with the these ETFs remaining an untapped area in Europe.
Market sentiment among respondents showed a decline, with only 4% being bullish, while government bonds remain the preferred investment.
Regulators rush to ‘charm’ active ETF issuers
Recent regulatory developments across Europe suggest a race among regions to attract active ETF issuers, with varying approaches creating potential disparities.
Ireland’s Central Bank is reportedly considering new ETF transparency rules, while France’s financial regulator proposed monthly disclosure of holdings to prevent other players from replicating the strategy.
Luxembourg announced a tax exemption for actively managed ETFs starting in 2025, with the government clear on its aims to become a leading domicile for active ETFs.
France’s efforts to attract issuers might be less effective, with Ciara O’Leary partner at Dechert commenting it is “hard to say” whether this will move the needle on attracting active managers to France.
Unlike Luxembourg’s active regulatory changes to attract issuers, Sergey Dolomanov, partner at William Fry, believes the CBI is unlikely to alter ETF transparency rules for the same reason.
Bitwise acquires ETC Group
Finally, this week saw Bitwise Asset Management enter Europe with the acquisition of ETC Group.
Following the acquisition, all nine of ETC Group’s crypto exchange-traded products (ETPs), including the $950mn Physical Bitcoin ETP (BTCE), will be rebranded under the Bitwise.
Despite the tie-up, white label issuer HANetf – which markets and distributes ETC Group’s ETPs – said its existing distribution agreement remains unchanged.
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