How ETFs are changing the landscape

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Institutional investors tend to be sceptical of the benefits of ETFs. ETFs have a wide spread, which can challenge an investor’s position. But increasingly they are being used for tactical purposes. BetaShares is setting the pace with new ETF offerings.

Martin Currie Investment Management is the latest in the new BetaShares list, totalling 53 ETFs. BetaShares runs a total of $7.5 billion. It is the fourth ETF with BetaShares for Legg Mason, the multi-affiliate parent of Martin Currie. The latest product is for Martin Currie’s highly rated emerging markets strategy.

Talking to the investors in ETFs, including big super funds, the ETFs we see now are not the liquid passive, and often expensive, investments of the past. According to Alex Vynokur, the chief executive of BetaShares, the strong trend for new ETFs is for active strategies – both equities and fixed income – but the passive funds still attract most of the money. “We are seeing a lot of interest from financial advisors, though, who want to blend active and passive strategies,” he said last week. “Our view is that there is definitely room for both.”

BetaShares has been the most prolific of the facilitators bringing institutional-quality strategies to the listed market, either with LICs and LITs or ETFs. The ASX has made listing such products a lot easier than it was previously and investors, particularly individuals through SMSFs, have lapped them up.

“We want to make sure we bring something of value to the market,” Vynokur said. “We really do partner with our managers, like Legg Mason. We think we have complementary skills. Our strengths are our ETF infrastructure, the education we do with customers and investors and our distribution… We want to continue to bring new products to the market.”

While BetaShares believes it can bring a new ETF to the market quicker than anyone else, given ASX and ASIC backlogs, it does have its own queue of managers in the wings. “We have literally dozens of firms talking with us,” Vynokur said. “We have been doing this for nine years now and I think we can do it very well.”

The Martin Currie active ETF for emerging markets is run out of the firm’s head office in Edinburgh and has been invested in by Australian institutional investors for many years (see separate report for the firm’s latest market commentary).

BetaShares publishes an interesting monthly review of the exchange-traded product market. This is the latest edition.

– G.B.

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