Investors are pouring money into active ETFs, but a closer look reveals a migration of assets into the wrapper instead of a resurgence in alpha-chasing bets https://t.co/sMhLWmUv9v ...

Core Insights - The SEC's 2019 ETF rule has significantly streamlined ETF product development, leading to a surge in new ETF launches, particularly benefiting active ETFs in the bond market [1][2] - The Avantis Core Fixed Income ETF (AVIG), launched in October 2020, exemplifies the active ETF approach to core bond funds, charging a competitive fee of just eight basis points [2][3] - AVIG focuses on global investment-grade debt securities, aiming for a weighted average maturity close to that of the Bloomberg Barclays U.S. Aggregate Bond Index, and employs an analytical approach to assess expected income and capital appreciation [2][3] Performance and Appeal - AVIG's strategy emphasizes outperformance and lower costs, distinguishing it from traditional mutual fund core bond offerings, while providing greater transparency and flexibility [3] - The active management of AVIG allows for quicker adaptation to market changes, such as replacing defaulted securities more efficiently than passive funds [3] - Year-to-date, AVIG has returned 7%, indicating strong performance and making it an appealing option for investors looking to refresh their core bond allocations [3]

Financial Data and Key Metrics Changes - MSCI reported organic revenue growth of 9%, adjusted EBITDA growth of 10%, and adjusted earnings per share growth of over 15% in Q3 2025 [6] - The company repurchased $1.25 billion worth of shares in Q3, bringing year-to-date repurchases to over $1.5 billion, with an additional $3 billion authorized for future repurchases [6] Business Line Data and Key Metrics Changes - The index franchise achieved recurrent net new subscription sales growth of 27%, with 43% growth in the Americas [7] - Total AUM in investment products linked to MSCI indices reached $6.4 trillion, including $2.2 trillion in ETFs and $4.2 trillion in non-ETFs [7] - Analytics delivered recurrent net new sales growth of 16%, driven by strong adoption of risk tools and equity models by hedge funds [8] - Subscription run rate growth for wealth managers was nearly 11%, while asset owners posted 9% growth [12][14] - Subscription run rate growth for banks and broker dealers was 9%, with a record level of recurring sales [15] Market Data and Key Metrics Changes - Equity ETFs linked to MSCI indexes captured $46 billion of inflows during Q3 2025 [17] - The index retention rate remained durable at nearly 96% [17] - Sustainability and climate solutions saw an 8% subscription run rate growth, with climate solutions growing at 16% [19] Company Strategy and Development Direction - MSCI is focusing on expanding its presence in private credit and enhancing its client segmentation strategy [10][25] - The company is leveraging AI to enhance existing products and develop new capabilities, aiming for significant value creation for shareholders [9][41] - MSCI is committed to helping the active asset management industry recover by creating new products, particularly in the active ETF space [31][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term opportunities and the ability to drive growth from recent innovations [16] - The company is seeing solid momentum in delivering new products and capabilities, translating into tangible results [21] - Management acknowledged challenges in the sustainability and climate segment but emphasized the potential for monetization through indices [54] Other Important Information - MSCI launched a private credit factor model and a new global taxonomy for private assets, enhancing transparency and standardization [8][9] - The company is actively developing datasets and products for market makers and broker dealers to fuel liquidity [33] Q&A Session Summary Question: Strategy around private credit - Management is bullish on private credit, emphasizing the need for transparency tools for private credit funds to attract investors [24][25] Question: New products and marketing efforts - The strategy includes creating new products for the active asset management industry and expanding into other client segments [31][35] Question: AI opportunities and cost savings - AI is expected to dramatically increase margins by creating new products and reducing operational costs [63][64] Question: Sales momentum in asset management - The sales momentum is attributed to upselling additional content and services to existing clients, particularly in index [68] Question: Competitive moat against new entrants - MSCI's proprietary data and trusted brand create significant barriers to entry for competitors [72][75] Question: Performance of net new sales in EMEA - There was a decline in net new sales in EMEA, with management noting the need for further product innovation in that region [78]

The active ETF has seen its AUM rise by $618 million over the last six months, per ETF Database data. It has done so with a combination of flows and price appreciation. TSPA has added $225 million in net inflows, per ETF Database data, over the last six months, as of October 22. It has done so while performing well, returning 14.2% YTD. That has outperformed the fund's ETF Database Category average in that time. What's more, the fund has also outperformed its average over one- and three year-periods. How, ...

Core Insights - The trend towards alternative investment strategies, including derivatives and active ETFs, is gaining traction among investors seeking diversification and income generation [2][6][10] ETF Market Dynamics - ETFs have evolved over the past 30 years, providing access to various investment strategies that were previously unavailable to common investors [2][3] - There has been explosive growth in specific market segments, particularly in precious metals and cryptocurrencies, indicating a shift towards these alternatives becoming mainstream assets [4][6] Investor Behavior - Investors are increasingly using covered call strategies and other options-based approaches to manage risk and enhance income from existing holdings [2][3] - The current market environment, characterized by high yields and a weaker dollar, is prompting investors to seek uncorrelated assets to diversify their portfolios [8][12] Product Innovation - The ETF industry is witnessing rapid product innovation, with a significant increase in the launch of active ETFs and alternative-based products [10][12][20] - New managers are successfully entering the market, indicating a shift in the competitive landscape and a growing acceptance of diverse ETF offerings [12][14] Fee Structure and Performance - The trend towards active ETFs has led to a higher fee structure, reflecting the increased complexity and management effort required [15][16] - Investors are becoming more tolerant of higher fees for active management, especially when compared to traditional hedge fund fees [17][18] Due Diligence and Complexity - There is a growing demand for due diligence as investors navigate the complexities of new ETF products that utilize options, leverage, and derivatives [18][20] - Clients are increasingly interested in understanding how these new products fit into their overall portfolio strategy and risk-return profiles [19][20]

ETF Market Trends & Innovation - ETFs are providing access to strategies previously unavailable to common investors, such as covered call and option premium strategies [2] - Explosive growth is seen in specific market segments like precious metals (gold) and cryptocurrencies (Bitcoin) [4] - Alternative assets, including precious metals and crypto, are increasingly being adopted into mainstream investment portfolios to diversify and find uncorrelated assets [6] - Product innovation is driven by new demand, with a focus on active ETFs and derivative strategies [8][9][12] - The industry has shifted towards active ETFs, with new entrants differentiating themselves through innovative product offerings [10][11][12] Fees & Performance - While passive ETFs have seen fee compression, active ETFs can support higher fees due to the increased workload [14][15] - Higher fees for active management put pressure on managers to deliver performance [15][16] - The ETF fees should be compared to other industries like structured notes or hedge funds, where similar profiles or payoffs may come at a higher cost (e g, 2 and 20 in hedge fund wrapper) [17] - There's increased tolerance for fee elasticity, especially if end-users can access high-octane active management [17] Due Diligence & Risk - Due diligence conversations have increased due to the complexity of new ETF products using options, leverage, and swaps [18] - Clients are interested in how these new alternative-based ETF products function within their overall portfolio and their risk-return profile [18] - Investors are seeking to understand the potential systemic risks associated with the rapid pace of ETF innovation and launches [19][20]

Core Insights - Aberdeen Investments has expanded its active ETF offerings with two new mutual fund conversions, focusing on municipal bonds and international small-cap equities [1][2][3]. Group 1: abrdn Ultra Short Municipal Income Active ETF (AMUN) - AMUN aims to provide high after-tax income while preserving capital, with a net expense ratio of 25 basis points [1]. - The fund primarily invests in investment-grade fixed income securities and targets an average effective duration of about two years or less [1]. - AMUN is expected to have significant exposure to municipal securities from states such as Pennsylvania, Mississippi, New York, and Texas [1]. Group 2: abrdn International Small Cap Active ETF (ASCI) - ASCI seeks long-term growth by focusing on international small-cap stocks, with a net expense ratio of 0.70% [2]. - The fund's active management approach aims to mitigate risks typically associated with international small-cap investments [3]. - ASCI's portfolio team evaluates companies based on quality, growth, and momentum, targeting high-quality firms with strong performance potential [3]. Group 3: Market Position and Growth - The launch of these fund conversions coincides with Aberdeen's U.S. ETF franchise surpassing $18 billion in assets under management (AUM) for the first time, indicating the strength of its fund lineup [4]. - Jim O'Connor, CEO of Americas at Aberdeen, emphasized that this milestone reflects the firm's commitment to meeting evolving client needs and the trust investors place in their differentiated approach [4].

Core Insights - Active exchange-traded funds (ETFs) have gained significant popularity among investors, indicating a shift in market dynamics [1] Group 1 - The rise of active ETFs suggests they are no longer a niche product but have become mainstream in investment strategies [1] - Investors are increasingly recognizing the potential benefits of active management within the ETF structure [1] - The growth in active ETFs reflects broader trends in the investment landscape, where traditional passive strategies are being complemented by active approaches [1]

Core Insights - Investors have invested over $900 billion into U.S. exchange-traded funds (ETFs) in 2025, with a net inflow of $917 billion through September 29, indicating a potential record year if the trend continues [1][2][8] - The Securities and Exchange Commission (SEC) is expected to approve dual-share class structures, allowing mutual fund investors to convert to ETFs in a tax-efficient manner, which could further boost ETF inflows [3][6][7] Investment Trends - ETFs have gained popularity due to their tax advantages and efficiency compared to mutual funds, with significant inflows driven by bullish investors seeking diverse investment strategies [2][6] - The total assets in U.S. ETFs reached a record $12.19 trillion by the end of August 2025, up from $10.35 trillion at the end of the previous year [8] Notable Funds and Strategies - Vanguard's S&P 500 ETF (VOO) and BlackRock's iShares Core S&P 500 ETF (IVV) have seen nearly $140 billion in net inflows this year, averaging close to $1 billion per trading day [9] - BlackRock's iShares Bitcoin Trust ETF (IBIT) has emerged as the fastest-growing ETF, attracting nearly $24 billion in 2025, highlighting the demand for innovative investment products [12] Market Dynamics - The shift towards active ETFs has accelerated, with active funds now comprising close to 10% of the market's assets and capturing 37% of total inflows through July 2025 [17] - Financial advisers are increasingly moving away from traditional investment strategies, opting for alternative strategies that offer customization and risk management [16][18]

ETF Market Overview - The ETF market has seen net inflows of over $855 billion this year and is on pace for another $1 trillion year [1][2] - ETFs are attractive to investors due to their liquidity, cost efficiency, and transparency [2] Emerging Markets Debt (EMD) - EMD ETFs experienced flat flows for the year but have seen a reversal with approximately $20 billion in inflows in the last four and a half months, following over three years of sustained outflows [3] - The macro backdrop for emerging markets is considered benign, supporting potential investment [4] - A weaker USD and the Fed initiating a rate hiking cycle have historically been supportive of EMD [5] Active vs Passive EMD ETFs - Historically, around 70% of actively managed EMD funds have outperformed passive ones over the last 10 years [7] - Newberger Berman has an active ETF hard currency sovereign vehicle [7] EMD Market Dynamics - Approximately $150 billion, representing 15-16% of all assets in dedicated vehicles, had left the EMD asset class until April of this year, indicating substantial capacity for investors to re-enter the space [8] - Emerging markets are growing at stronger rates with better fundamental and fiscal dynamics, including lower public debt to GDP ratios compared to developed markets [9] - Mexico's public debt to GDP is expected to be around 55% in 2026 [9]