More than four in five (82 per cent) wealth managers and family offices agree that exchange-traded funds (ETF) are moving from short-term asset allocation strategies to core portfolio holdings, research commissioned by Carne Group has found.

The analysis of wealth managers, family offices, and institutional investors, conducted by Pureprofile, showed that respondents were expecting the market share of active ETFs to increase dramatically over the next three years.

Nearly two-thirds of investors said that active ETF assets will increase from around a 2 per cent market share of total ETF assets in Europe to between 6 per cent and 9 per cent before the end of the decade.

Investors were also found to be using active ETFs to access new asset classes, with a quarter saying they invested in crypto for the first time following innovation in the ETF market and 56 per cent increasing their allocation to the asset class.

However, the research showed some concern from investors that certain ETFs were not living up to their active labels, including the rise of ‘shy active’ ETFs that follow a benchmark-aware approach.

Nearly nine in 10 (88 per cent) respondents said that managers operating these sly active funds were “misleading the market”.

Carne Group managing director, business development, Patrick O’Brien, said: “Active ETFs will provide the momentum for the next stage of the ETF growth story to take flight.

“Unlocking the opportunity in this highly competitive space requires careful consideration and speed of execution which is why we are seeing managers increasingly partner with third parties.

“We share concerns about the risk of ‘shy active’ ETFs which can be problematic for investors because they often operate under the guise of active management while closely hugging a benchmark index. Fund managers need to be sure they are transparent about the strategies they offer.”

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