Broadridge Financial Solutions: Active ETFs Projected to Reach $1.2 Trillion by 2027
- Broadridge projects active ETF assets will reach $1.2 trillion by 2027, up from $81 billion in 2019.
- 77% of active ETF assets are controlled by the top ten asset managers, raising competition concerns.
- Broadridge emphasizes strong distribution strategies for asset managers to leverage the growing active ETF market.
Active ETFs: A Transformative Shift in Asset Management
Broadridge Financial Solutions, Inc. highlights a significant trend in the asset management industry with its recent findings on the growth of active exchange-traded funds (ETFs). According to their whitepaper titled "Active ETFs: Achieving Escape Velocity," active ETF assets are projected to surge to $1.2 trillion by 2027, a remarkable increase from just $81 billion in 2019. This projection reflects a broader shift in investor preferences as active ETFs have already seen assets soar over 600%, reaching $631 billion in 2024. Such growth suggests that active ETFs are increasingly becoming a vital component of investment portfolios, driven by their flexibility and potential for higher returns.
Despite this remarkable growth, the market exhibits a concerning concentration issue, with 77% of active ETF assets controlled by the top ten active asset managers. This concentration raises questions about competition and innovation within the sector. Moreover, the whitepaper reveals that only 11% of active ETFs launched in the past three years have surpassed the crucial milestone of raising over $100 million in their first year, a benchmark often associated with long-term viability. While the industry witnessed a record launch of 660 active ETFs in 2024, active ETFs still account for a mere 6% of total active assets under management, indicating a significant opportunity for asset managers willing to navigate this evolving landscape strategically.
Davis Walmsley, Head of US Solutions at Broadridge Data and Analytics, emphasizes the necessity of robust distribution strategies as asset managers seek to capitalize on this growth. The report advocates for leveraging Registered Investment Advisor (RIA) channels, which dominate the active ETF asset landscape. To succeed, asset managers should follow three guiding principles: "go with the flow," which encourages alignment with effective distributors; "pick a lane," urging a focus on niche strategies; and "embrace the concept that less is more," promoting streamlined offerings. As active ETFs capture the attention of retail investors, asset managers must create comprehensive strategic plans to meet the evolving demands of the market.
In addition to the insights on active ETFs, Broadridge's whitepaper underscores the importance of adaptability in distribution channels. As investor preferences shift and competition intensifies, effective communication and distribution methods become crucial for asset managers looking to thrive. The recommendations provided serve as a roadmap for navigating the complexities of this burgeoning sector, ensuring that managers can effectively reach their target audiences and capture market share.
Overall, Broadridge Financial Solutions positions itself at the forefront of the active ETF conversation, providing valuable insights that not only illustrate the current state of the market but also guide asset managers in harnessing the full potential of this transformative asset class.
