Industry Updates

ETF Wrap: A true test for active ETFs

The arrival of an active posterchild, ETFs outpacing mutual funds and developments in key regulations made headlines this week

Jamie Gordon

This week ETF Stream revealed the arrival of a rendition of JP Morgan Asset Management $30bn equity income ETF to Europe, a move that will be a true test of whether active ETFs can catch on in Europe.

The JP Morgan Global Equity Income UCITS ETF (JEPG) is designed to offer investors between 7-9% income per year, in addition to lower volatility than the MSCI World index.

It is a global equity version of its $30bn JP Morgan Equity Premium Income ETF (JEPI) listed in the US, which has enjoyed $13bn inflows so far in 2023.

Only time will tell whether JEPG will enjoy similar success this side of the pond, with little over 100 active ETFs currently housing $30bn assets under management (AUM) combined.

ETFs outpace mutual funds by €180bn

Next, ETFs have booked €180bn more inflows than mutual funds so far this year in Europe, with €119.7bn into ETFs, €31bn into index mutual funds and a considerable €90.9bn outflow from active mutual funds.

ETFs have been a key tool for investors implementing the ‘bonds are back’ trade, with fixed income ETFs comprising half of all ETF inflows by the end of Q3. The ETF wrapper also continues to benefit from its low costs and the rise of retail investing through digital channels.

Regulatory limbo 

Finally, more question marks for key regulations across fund passporting and ESG.

The Financial Conduct Authority (FCA) launched a consultation on its upcoming Overseas Funds Regime (OFR), which is set to be opened in April 2024, subject to the UK government granting equivalence to UCITS funds.

Elsewhere, further overhaul is on the cards for the EU’s Sustainable Finance Disclosure Regulation (SFDR) while the UK’s Sustainable Disclosure Regulation (SDR) lacks clarity on whether it will be applied to overseas funds.

ETF Wrap is a weekly digest of the top stories on ETF Stream

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