Fuse Blog

Don’t Miss This

1) ETFs’ Big Three Struggle to Make Mark in 2020’s Largest Launches

Bloomberg  |  1/4/2021

Because… The article’s title suggests that the big three (BlackRock, Vanguard, State Street) are falling behind in terms of their new funds ability to gather assets. Such catchy headlines can be very misleading for indiscriminate investors. The big three have not loosened their grip despite fierce competition. They still controlled 80% of the ETF market share, just 1% less than a year ago. They were also three best-selling ETF providers in 2020, which accounted for 70% of the industry’s net inflows. The article mentioned that “JPMorgan’s BetaBuilders U.S. Mid Cap Equity ETF (BBMC) attracted the most cash out of any 2020 release, ending the year $1.3 billion in total assets after its April debut.” However, JP Morgan is well known for its BYOA (Bring-Your-Own-Assets) strategy. Comparing new funds with such a practice to others that start from scratch is not a fair comparison. Lastly, a fast pace at the beginning does not necessarily translate into a strong finish. Stamina built over time helps a runner win in the end.

2) 2020 Breaks ETF Records, Sees Active Expand

ETF.com  |  1/5/2021

Because… Against a backdrop of record-high inflows in 2020, we are not surprised by the record-breaking number of ETF launches. Two stats are noteworthy though. First, more than half (about 170) of the 275 ETFs introduced last year were actively managed (including 54 defined income ETFs). We expect to see more introductions of nontransparent active ETFs in 2021, although first movers have yet to achieve any blockbuster success. Their slow start will not deter others from testing the water themselves. The lack of dominant players in this nascent field could provide another reason for latecomers to jump in. Second, the number of new U.S. Equity ETFs (156) more than tripled the number of new U.S. Fixed Income ETFs, even though U.S. Fixed Income beat U.S. Equity in sales for the second consecutive year. The gap between the two widened from $5.2 billion in 2019 to $21.0 billion in 2020. This indicates that U.S. Equity remains a product development focus despite better sales of U.S. Fixed Income ETFs.

3) Publicly Traded Asset Managers Are No Longer Boring

Institutional Investor  |  1/7/2021

Because… According to the latest FUSE estimate that included 29 publicly-traded fund firms, their combined assets of $20.1 trillion at the end of September 2020 increased by 11.7% from a year ago. Seventeen firms grew their assets during the 12-month period, whereas 12 asset managers saw asset decrease. Their average 12-month operating profit margin of 27.7% suggests that asset management firms in general are still in a good position to deliver shareholder value, despite the strong headwinds they are facing. Most of these publicly-held asset managers have actively managed products as their main business focus. To retain shareholders, they need to work harder at controlling risks of active strategies, maximizing fund returns, reducing expense ratios, motivating portfolio managers, communicating frequently and effectively with investors, and establishing thought leadership on specific investment issues.