Institutional Investors Eyeing Active ETFs

In a year that has seen active ETFs accelerate notably, institutional investor interest has grown in turn. Institutional investors, the pension funds, insurance companies, endowment funds, and other mega-money players have slightly different fund needs than retail investors. That said, they have increasingly turned to ETFs over the last decade or so, thanks to their transparency and tax advantages. This year, however, has seen particular institutional investor interest in actives.

That’s an observation from a recent survey conducted by PwC. The ETF manager survey, “ETF 2027: A world of new possibilities,” found that “nearly a quarter” of institutionals said they are looking at investing in actives in the next 12 to 24 months. That comes following another survey in which a majority of respondents shared that they plan to increase their active allocation in the next few years.

Not only does the PwC survey indicate broader institutional interest in active strategies, but also other reports point to specific interest. Asian institutions, for example, are increasingly looking at active strategies. Active strategies appeal to those organizations for notable yields, potent diversification, and helpful liquidity.

On top of those yield and diversification benefits, why else might active strategies appeal? Active managers can lend their years of expertise to their funds, for example. That can help navigate complicated, volatile environments. At the same time, actively managed ETFs with a total return approach can add current income to a portfolio. Perhaps most important, however, is active ETFs’ ability to outperform their benchmarks.