Overseas managers have ‘no real advantage’ in Asia active ETFs

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Global asset managers that are launching new active exchange traded funds in various Asia Pacific markets will find they have “no real advantage” over domestic rivals, according to State Street.

Frank Koudelka, State Street’s global head of ETF solutions, said he had seen growing interest from global asset managers to launch active ETFs in established markets such as Australia, and new markets such as Japan, Singapore and Taiwan.

This interest is coming from global fund firms that already had a range of passive ETFs as well as those without an ETF footprint in the region, he told Ignites Asia.

Taiwan opened its doors to active ETFs in January this year. Japan’s Nomura Asset Management and US manager AllianceBernstein both lodged applications for active ETFs in Taiwan last month. JPMorgan Asset Management also plans to enter the new sector.

This article was previously published by Ignites Asia, a title owned by the FT Group.

State Street predicts that at least five asset managers, both global and domestic, will roll out active ETFs in that market this year, according to its 2025 Global ETF Outlook.

Foreign fund firms that hope their global expertise will provide a leg up over their domestic rivals may find themselves disappointed.

Koudelka said global asset managers would have “no real advantage” over local rival fund firms in Taiwan’s emerging active ETF sector.

Rather than relying on their expertise in other markets, global fund firms would need to focus on developing products that were tailored to address the needs of local investors, such as the appetite for income-generating solutions, he noted.

Providers will also need to develop an effective strategy for distributing and marketing their new active ETFs that can compete with incumbent assets managers with strong brand recognition in the local ETF market.

But State Street also believes the approval of active ETFs in Taiwan will have “positive implications” for managers that have seen their market share reduced at the expense of passive ETFs.

Neither AB nor JPMorgan AM have any passive ETFs listed on the local bourse, while Nomura AM has five, according to the Taiwan Stock Exchange website.

Passive ETFs have enjoyed massive growth in Taiwan’s asset management industry, but it remains to be seen whether active ETFs can ride the coattails of that expansion.

Taiwan’s ETF market grew 54 per cent last year and ETFs account for 65 per cent of the total mutual funds market, according to the State Street report, which predicts that it will reach 75 per cent this year.

State Street also expects total Taiwan ETF assets to grow from $196.6bn to $250bn by the end of 2025.

Koudelka said he was “bullish” on active ETFs in the Asia-Pacific region given the “kernels of growth” in the markets that had introduced the products, and the fact that they were expanding to other markets.

But despite the growing interest from asset managers in launching active ETFs in the region, local investors may still take a wait-and-see approach to investing in such strategies.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.