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Asset Manager in the UK, Jupiter is launching an Active Exchange Trading Fund to attract customers as investors continue to withdraw money from traditional open-ended funds in the industry.
The FTSE 250 Fund Group has listed global government bond ETFs on the London Stock Exchange. Jupiter wants to break the benchmark index by actively selecting equipment using a fund manager, rather than using passive tracking.
The move shows an iconic shift in fund boutiques that manage around £5 billion and have sold traditional open-ended funds since launching 40 years ago.
“The risk is that if you sit there and do nothing, the ETF continues to cannibalize assets held in traditional funds,” said Matthew Beesley, CEO of Jupiter.
Open-ended funds or unit trusts are priced once a day based on the value of the investment. ETFs are traded on exchanges and priced throughout the trading day.
Jupiter's move is the latest initiative by managers to counter the outflows from Stockpicker Run's open-ended funds, which tend to charge relatively high fees. Instead, investors are turning to low-cost passive products for low-cost rates and index-linked returns. Retail investors withdraw £1 billion from UK stock open-ended funds in January, according to Funds Network Calastone.
Because ETFs are usually passive and simply follow securities indicators, it is eye-catching for Jupiter to use fund managers to select securities. Active ETFs charge higher rates than passive products, but their rates tend to be lower than those of traditional stock picker managed funds.
“We're testing water with this, and if we succeed, we'll launch more,” says Beesley. “We're an active management house, so this will be a really active ETF.”
Other global asset managers, including JPMorgan Asset Management, Fidelity International and Janus Henderson, are preparing to launch more active ETFs this year. Patrick Thomson, CEO of Europe, the Middle East and Africa at JPMorgan Asset Management, said European adoption rates are “incredibly fast.”
However, the risk for asset managers is that cheaper, active ETFs can tempt investors from existing, more expensive equity funds.
Jupiter said its active ETF strategy is different from other products, noting that its total cost ratio is 0.3%. According to MorningStar Direct, the average cost of ETFs available in the UK is around 0.19%.
The fund group said the launch came after exploring “new delivery methods” for its products and then researched how “broader clients” could access “wide range of investment expertise.”
The Jupiter Global Government Bond Active UCits ETF is managed by Vikram Aggarwal and focuses on mispricing in the sovereign bond market.
