Royal London and M&G target Europe’s growing active ETF market

Royal London Asset Management (RLAM) and M&G are gearing up to enter Europe’s rapidly growing active exchange-traded fund (ETF) market, a move that underscores the mounting pressure on traditional mutual funds amid rising fee competition.

RLAM CEO Hans Georgeson said the firm would open a new office in Dublin over the next 18 months as part of plans to expand further internationally and enhance its presence in the active ETF segment. The initiative aligns with RLAM’s broader strategy to enhance its £184 billion asset management arm.

Georgeson noted that the ETF market is evolving quickly and emphasized RLAM’s ambition to rank among the top ten players in the sector. He added that the company intends to launch both equity and fixed-income products as part of its upcoming lineup.

Highlighting the global accessibility of ETFs, Georgeson stressed that expanding into this market is essential for the firm’s international growth.

RLAM and M&G set to join the active ETF market to expand internationally

Following its rapid expansion, analysts conducted thorough research into the active ETF market. They discovered that this market allows fund managers to attempt to outperform a market index, such as the FTSE 100, while being more affordable and simpler for investors to trade than traditional mutual funds.

Contrastingly, traditional “passive” ETFs imitate an index’s returns without trying to outperform it. In the meantime, concerning the growing interest in Europe’s active ETF market, Goldman Sachs’ fund division recently shared a report revealing that the overall amount of assets managed in the sector since 2019 has significantly increased to around seven times the previous amfount, reaching €68.6 billion.

This report also highlighted that the number of funds and providers has similarly increased with the launch of active ETFs, surpassing those of passive ETFs for the first time in history.

To cope with the stiff competition in the ETF market, M&G announced that its first active funds will be available in just a few weeks. This launch will focus on UK government bonds and US Treasuries. These exchange-traded funds will attract new categories of investors and are likely to enhance their current partnerships, Neil Godfrey, who leads the client group at M&G Investments, asserted.

Godfrey further explained that since many clients are already familiar with ETFs, they believe there is a natural shift towards more active options that will enable individuals to establish new ways to connect with allocators and their advisers across the UK, Europe, and Asia.

Traditional fund companies opt to offer more active options to their clients

Apart from RLAM and M&G, other traditional fund companies have also demonstrated growing interest in the market by participating in it this year. Moreover, Schroders introduced its first Europe-based active ETFs in September, which invest in global stocks and top-notch corporate bonds.

Johanna Kyrklund, Chief Investment Officer at Schroders, commented on the situation, stating that these products provide the flexibility and accessibility of an ETF wrapper. At the same time, he mentioned that they can take advantage of the skills of the group’s fund managers, who can assist in earning better returns.

Meanwhile, Jupiter entered the market at the start of this year with a global government bond active exchange-traded fund. Jupiter’s CEO, Matthew Beesley, mentioned that the risk associated with this sector is that if one sits back and does nothing, then ETFs will continue to take assets away from traditional funds.

Unlike traditional mutual funds, which are priced once a day based on their investment value, exchange-traded funds trade on an exchange and have prices that fluctuate throughout the trading session.