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Overseas Managers Face No Real Advantage in Asia’s Active ETF Market

Global asset managers venturing into Asia’s active exchange-traded funds (ETFs) market may find themselves on equal footing with local players, according to State Street. Despite their experience in other markets, international firms will need to tailor their strategies to meet local demands.

Rising interest in active ETFs

Frank Koudelka, State Street’s global head of ETF solutions, noted an increasing interest among global asset managers in launching active ETFs across Asia Pacific. Established markets like Australia and emerging ones such as Japan, Singapore, and Taiwan are attracting attention. Taiwan, in particular, opened its doors to active ETFs in January, with major players like Nomura Asset Management and AllianceBernstein already filing applications.

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No real advantage for global players

State Street’s 2025 Global ETF Outlook suggests that at least five asset managers, both global and domestic, will enter Taiwan’s active ETF market this year. However, Koudelka warned that global expertise alone won’t provide a competitive edge. Instead, firms must develop products tailored to local investors’ preferences, such as income-generating solutions, and establish effective distribution and marketing strategies.

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Positive implications and market potential

While foreign managers face stiff competition, the approval of active ETFs in Taiwan may benefit managers losing ground to passive ETFs. Passive ETFs have seen massive growth, making up 65% of Taiwan’s mutual funds market in 2024, with projections to hit 75% by the end of 2025. Total Taiwan ETF assets are expected to grow from $196.6bn to $250bn within the same timeframe.

Future outlook

Despite global interest in active ETFs in the region, local investors may adopt a cautious “wait-and-see” approach. However, Koudelka remains optimistic, citing promising growth in markets that have embraced active ETFs and their expansion across the Asia-Pacific region.

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Conclusion

As the Asian active ETF market heats up, global asset managers must adapt to local needs and competition. While opportunities abound, success lies in understanding the nuances of each market and delivering solutions that resonate with regional investors.

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