Vantage Point: Investing for growth  

What role can active ETFs play in portfolios?

  • Explain how active ETFs work
  • Understand how active ETFs differ from investment trusts
  • Identify the liquidity considerations associated with active ETFs
CPD
Approx.30min

Of course, the structure has not been tested through a crash. In that scenario, the bid-offer spread may widen, but as I am writing the bid-offer spread on the active ETF I now manage — the HANetf Global Balanced Fund Ucits ETF — is less than 20bp.

That is not dissimilar to the bid-offer spread on many investment trusts with a similar asset allocation — and a lot less than on many of the smaller ones. It can vary, of course. 

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I believe that if the underlying assets are highly liquid — as they will be in a global equity fund, for example — then this is less likely to be an issue.

Alex Illingworth is the founder of Goshawk Asset Management

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to the author, in what year was the first investment trust launched?

  2. How many investment trusts does the author say there are today?

  3. What proportion of S&P 500 stocks underperformed the index in 2023?

  4. What proportion of the total ETF market was accounted for by active ETFs at the start of this year?

  5. What is the role of “authorised participant” in the ETF market?

  6. What does the author say is typical of the active ETFs on the market right now?

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You have successfully answered all the questions correctly, well done!

You should now know…

  • Explain how active ETFs work
  • Understand how active ETFs differ from investment trusts
  • Identify the liquidity considerations associated with active ETFs

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