Active ETF Market Sees Growth Trends in Australia and Europe

The Australian ETF industry is experiencing significant growth, with assets under management projected to reach $230 billion by the end of 2024 and potentially $500 billion in five years, according to a recent EY report. Despite this positive outlook, the active ETF segment is struggling, as evidenced by Dimensional Fund Advisors' recent launch of new active ETFs amid minimal asset growth and rising fund closures in Australia. In the US, the T. Rowe Price Capital Appreciation Equity ETF (TCAF) has gained traction, attracting over $2 billion in assets within a year, providing flexibility to capitalize on potential interest rate cuts. Additionally, the European ETF market remains largely passive, with active ETFs still capturing a small share despite their growth potential, and managers like Janus Henderson are looking to expand their active offerings. The competitive landscape highlights a stark contrast in fees between active ETFs and traditional mutual funds, with active ETFs generally offering lower costs. Overall, while there are opportunities for growth in both active and passive ETFs, market challenges remain prevalent, particularly for active strategies.