Sustainable fund specialist Robeco launches first ETFs

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Dutch asset manager Robeco will today launch its first exchange traded funds, joining a phalanx of traditional active managers that have embraced the fast-growing fund format.

While most ETFs have traditionally been passive index-tracking funds, actively managed ETFs have taken off in recent years and now account for about $1bn of the industry’s $14bn of assets under management, according to ETFGI, a consultancy.

They have proved lucrative for asset managers, particularly in the US, where they have seized 72 per cent of the net new fee revenue emanating from inflows into ETFs so far this year, according to Morningstar data, even as actively managed mutual funds have continued to haemorrhage money.

The active ETF market is less well developed in Europe, accounting for about 2 per cent of the continent’s $2.2tn in ETF assets. However, activity is hotting up with both Cathie Wood’s Ark Invest and BNP Paribas Asset Management launching their first active ETFs in Europe earlier this year, while BlackRock’s iShares debuted its first active equity ETFs. Jupiter Asset Management and Eurizon Capital are among those poised to follow suit.

The quartet of active ETFs from Rotterdam-based Robeco, a subsidiary of Japanese financial conglomerate Orix Corporation, are its first ETFs of any kind.

All four tap into Robeco’s existing specialities in its mutual fund business. The Dutch group earned a reputation as an early adopter of “sustainable” investment long before it became a fashionable bandwagon to jump on.

As a result, all but €3bn of its €196bn of assets under management were managed according to environmental, social and governance principles at the end of June. It also has two decades of experience with “enhanced” indexing strategies with systematic quantitative investing, which accounts for €76bn of its assets.

Its 3D Global Equity, US Equity and European Equity Ucits ETFs will tap into both of these strands in an attempt to balance risk, return and sustainability.

The fourth fund, the Robeco Dynamic Theme Machine Ucits ETF “showcases the company’s next-generation quantitative capabilities, utilising advanced natural language processing techniques to identify emerging investment themes early”, it says.

All four ETFs will be listed in Frankfurt, with additional listings, including on the London stock exchange, anticipated in “the coming months”. The 3D funds will have fees of 0.2-0.25 per cent, with the Dynamic Theme ETF priced at 0.55 per cent.

“Robeco has a long heritage of active management and is recognised as a leader in sustainable investing,” said Nick King, head of ETFs.

One further 3D ETF, an Emerging Markets Equity product, is scheduled to launch in the first quarter of 2025, with fixed-income ETFs also due next year.

Robeco’s mutual fund range has suffered from outflows of late, with a net €7.7bn heading out of the door in 2023 and €881mn in the first eight months of this year, according to data from Morningstar Direct.

However, Robeco denied its push into ETFs was a reaction to this. “The launch of the active ETF range is an integral part of our corporate strategy [for] 2021-2025,” it said.

“We see active ETFs as an additional vehicle to monetise our intellectual property in sustainable investing, quant, credits and thematic investing.”

Peter Sleep, investment director of wealth manager Callanish Capital, welcomed the launches.

“In my opinion, Robeco is one of the highest-quality, classiest outfits in Europe,” he said. “They were thought leaders in ESG before everyone else jumped on the bandwagon and have a team of research professionals comparable to AQR and Dimensional”, two well-regarded US quant houses.

Of the 20-25bp fees for the 3D ETFs, Sleep said: “That strikes me as very reasonable, and consistent with what we have seen from other big low-tracking-error active funds from JPMorgan, Fidelity and Franklin Templeton.”