Sign Up
Sign Up

Investment Managers Accused of Misleading Market on ‘Active’ ETFs

Leading industry figures have raised concerns that some investment managers are marketing Exchange-Traded Funds (ETFs) as actively managed, while their behavior closely resembles that of passive index-tracking funds. This discrepancy has sparked debate over transparency and the true nature of these financial products.

Industry Overview: Active or Passive?

According to top industry data, many investment managers are launching ETFs labeled as “actively managed” but which behave similarly to passive funds that track benchmark indices. A survey by Carne Group, a third-party management company, revealed that 88% of asset managers and institutional investors believe these funds do not live up to their active management label.

Bốn quỹ ETF sắp mua vào hơn 11 triệu cổ phiếu HPG - Nhịp sống kinh tế Việt Nam & Thế giới

The Phenomenon of “Shy Active” ETFs

Quỹ ETF là gì? Các loại quỹ ETF phổ biến ở Việt Nam| FXCM VN

Few ETFs act like traditional stock-picking funds. Instead, many implement only minor tweaks to their underlying benchmarks—a strategy Morningstar’s financial services group terms “shy active.” Patrick O’Brien, Head of Business Development at Carne Ireland, warned that these timid active ETFs pose risks to investors because they operate under the guise of active management while sticking closely to standard indices.

O’Brien emphasized, “Fund managers need to ensure transparency about the strategies they pursue.”

Growth Trends in Active ETFs

In recent years, many asset managers have launched actively managed ETFs in Europe to meet growing investor demand. Morningstar data shows that actively managed funds accounted for 39% of net inflows into US ETFs in the first quarter, significantly higher than their 9.4% market share. Although European growth is slower, active ETFs still attracted about 8% of net inflows last year, compared to a 2.7% market share.

72 ETF tiền điện tử đang chờ SEC chấp thuận

Regulatory Impact on Transparency

The rise of less-known active ETFs partly stems from European regulations requiring daily public disclosure of ETF holdings. This transparency discourages managers from launching ETF versions of their most actively traded mutual funds due to fears competitors might copy their best trades.

However, since December, Luxembourg and Ireland—the hubs of Europe’s largest ETFs—have allowed “semi-transparent” fund structures. These enable managers to conceal portfolio details from rivals, encouraging genuinely active strategies.

Tiền vẫn chảy mạnh vào các quỹ ETF chứng khoán | Vietstock

O’Brien hopes such semi-transparent models will become widespread, allowing managers to protect their “secret recipes” without misleading investors. “Investors still see funds hugging their indices, but I believe this will change. The market is still nascent and will mature,” he said.

Expert Opinions on Active ETF Spectrum

Kenneth Lamont, Morningstar’s Research Director, described active ETFs as forming a “spectrum,” where some may be aware of their benchmark without misleading investors, as long as they do not promise a higher level of active management. However, he warned, “Not all investors understand what they are paying for, so some confusion is understandable.”

Kenneth Lamont | Morningstar

James McManus, Investment Director at Nutmeg, an ETF-focused platform, acknowledged concerns about disguised tracking but said the funds they invest in are “very clear about tracking errors and objectives.” He noted that “shy active” ETFs still have a role in portfolios, adding, “If you can consistently deliver 1% alpha annually, you can be 10% ahead in 10 years, with compounding gains. Investors must choose between diversification or taking concentrated risks.”

Conclusion

The debate over the true nature of “actively managed” ETFs highlights the need for clearer transparency and investor education. As regulatory environments evolve and fund structures adapt, the ETF market is expected to grow and mature, helping investors make more informed decisions about active versus passive strategies.

🔗 EXPLORE MORE LATEST NEWS RIGHT HERE!

DON’T MISS OUT, CLICK AND READ NOW!

🌍 Finance Solutes
  • t.me/finance_solutes
  • Website: https://finance-solutes.com
  • Hotline: +1 929 5636 439 ( Hotline )
  • 26 Broadway, Suite 934, New York, 10004, US