Active ETFs, Small ETFs and Other Trends to Watch in 2020

As we kick off the new year, market prognosticators are busy making their 2020 predictions. David Mann, our Head of Capital Markets, Global Exchange-Traded Funds (ETFs), offers some thoughts on trends and milestones within the ETF industry he thinks could come to fruition in 2020.

Is this really the fourth version of my New Year “predictions” posts?

As in previous versions, you are not going to get my call on where the S&P 500 Index will be a year from now—which is probably a good thing! However, it is also impossible not to note that many of the major US stock market indexes were up more than 30% last year, which should impact the ETF flows for 2020.1

Furthermore, last year we saw some major regulatory-related announcements impacting ETFs, including the adoption of the ETF Rule and approval of non-transparent, active ETFs. So, we probably need to incorporate the impact of those developments into my predictions for this year.

Here are my predictions for 2020.

Active Fixed Income ETF Assets Will Reach $110 Billion

Some recent trends worth highlighting that impact my prediction above:

  • Most active ETF assets (roughly 80%) are in fixed income funds.
  • Fixed income ETFs in general are becoming more and more popular; in 2019, fixed income ETFs accounted for almost half of the $334 billion of ETF inflows.2
  • The ETF Rule was finally passed. It states that operationally, there are essentially no differences between active and index funds, and it also evens the playing field regarding the usage of custom baskets for all fixed income ETFs.