ETF asset management

Nobody wants to be late to the party – not even fashionably late in this case. When it comes to rolling out an ETF in asset management, there is a time limit before the doors close, leaving lagging firms out in the cold. The HR Director Magazine and IR Magazine report that asset managers should be ready to implement a new ETF strategy within the next 3 years. Will you follow suit?

The 3-Year Plan

What’s the urgency, you cry? According to HANetf (Europe’s premier independent service provider of Exchange-Traded Funds), firms will find it difficult to launch new products or services without an ETF asset management strategy in place. As HANetf specialises in the compliance and distribution of ETFs, the service provider’s announcement that there is a 3-year countdown has shaken up the financial sector. If asset managers choose not to follow this advice (which is being implemented by firms in the US), European firms will lag further behind their competitors, due to the rise of ETFs in comparison to mutual funds.

If you’re still not convinced, HANetf co-CEO, Hector McNeil, claims that an ETF requires up to 3 years to gain any traction, become sustainable, or yield significant results. Therefore, the urgency should feel more immediate because if ETF asset management strategies are not set-up soon, managers will face a dramatic decline in 2021.

Fear of an ETF Fallout

Would it surprise you to know that an ETF asset management plan is not prompting everyone to evolve straight away? There have been fears circulating since 2017, predicting that the soaring success warrants too much of a risk.

In addition to this, asset managers have expressed a hesitance due to the following:

  • Existing funds being cannibalised
  • Higher level of liquidity in underlying funds
  • Underperforming funds due to distorted valuations
  • Costly product and service launches
  • Lack of interest in ETFs due to a competitive environment
Benefits of an ETF in Asset Management

While these fears may be regarded as extreme, there are many benefits to consider too. Why are ETFs so important, you may ask? The advantages of an ETFs are exceeding the advantages of mutual fund investing and open-end funds as follows:

  • Reduced operating costs
  • Flexible trading opportunities
  • Improved transparency
  • Greater tax efficiency

Because ETFs digitise the investing process, it has become more streamlined, making the tech an integral part of distribution. Therefore, asset managers are recommended to accept ETF tech to keep up with consumer demands and AI advances.

Notably, amidst the anxieties of trade wars in the US, the following ETFs have had a positive impact:

  • Invesco NASDAQ Internet ETF – Provides firms with an increased exposure to the top-ranking liquid companies listed in the US, by tracking the ‘Nasdaq Internet Index’
  • Invesco Dynamic Networking ETF – Focuses on networking in the technology sector and tracks the ‘Dynamic Networking Intellidex Index’
  • Vanguard Information Technology ETF – Offers asset managers a greater exposure to the technology sector, including leading companies like Apple
What’s Your Opinion?

If you’re still weighing up the benefits and fears of an ETF future, service providers like HANetf state that consulting closely with the ETF industry will help quash any inflated fears and assist firms in devising a tailored ETF strategy.

So, are you going to kickstart your ETF asset management strategy now? Tell us on Twitter and LinkedIn!

 

Source: The HR Director Magazine and IR Magazine

 

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