UK asset manager Jupiter is launching an active exchange traded fund in an attempt to attract customers, as investors continue to pull their money out of the industry’s traditional, open-end funds.
The FTSE 250 fund group has listed a global government bond ETF on the London Stock Exchange. Jupiter hopes to beat the benchmark index by using a fund manager to select the instruments actively, rather than using passive tracking.
The move marks a symbolic shift for the fund boutique, which manages about £50bn and has sold traditional open-end funds since its launch four decades ago.
“The risk is that if you sit there and don’t do anything, ETFs will continue to cannibalise the assets held in traditional funds,” said Matthew Beesley, chief executive of Jupiter.
An open end fund or unit trust is priced once a day based on the value of its investments. ETFs trade on an exchange and are priced throughout the trading day.
Jupiter’s move is the latest effort by a manager to counteract the outflows from stockpicker-run open-end funds, which tend to charge relatively high fees. Investors have instead turned to lower-cost passive products for their cheaper fees and index-linked returns. Retail investors pulled £1bn from UK equity open-end funds in January, according to funds network Calastone.
Jupiter’s use of a fund manager to select securities is eye-catching because ETFs are normally passive and simply follow an index of securities. While active ETFs charge higher fees than passive products, their fees tend to be lower than those for traditional stockpicker-managed funds.
“We’re testing the waters with this and if successful, we’ll launch more,” said Beesley. “We’re an active management house, so this will be a truly active ETF. ”
Other global asset managers, including JPMorgan Asset Management, Fidelity International, and Janus Henderson, are preparing to launch further active ETFs this year. Patrick Thomson, chief executive for Europe, the Middle East and Africa at JPMorgan Asset Management, said the adoption rate in Europe was “incredibly quick”.
However, the risk for asset managers is that cheaper active ETFs could lure investors out of their existing, more expensive stockpicker funds.
Jupiter said that its active ETF strategy was different from its other products and noted that it would come with a total expense ratio of 0.3 per cent. The average cost of ETFs available in the UK is about 0.19 per cent, according to Morningstar Direct.
The fund group said the launch came after it had explored “new methods of delivery” for its products and how a “wider range of clients” could access its “broad investment expertise”.
The Jupiter Global Government Bond Active Ucits ETF is managed by Vikram Aggarwal and will focus on mispricing in the sovereign bond market.