Page 17 - Investment Advisor - Jan/Feb 2021

ETF ADVISOR

By Bernice Napach and Michael S. Fischer

4 ETF Predictions for 2021

Experts anticipate more active ETFs, fee cuts, thematic and ESG funds and more.

E xchange traded funds had a

banner year in 2020.
New fund launches reached
a record 276, fund flows climbed to a
record $514.9 billion and one indepen-
dent fund company, ARK Investment
Management, had five active ETFs that
crushed most others in the industry in
terms of their performance.
Can such good times continue into
2021?
Investment Advisor spoke with sev-
eral ETF experts about their 2021 out-
looks for the industry. Here are some
key predictions:

1. EXISTING TRENDS TO CONTINUE
“If there’s anything we can count on in
2021 is that many of the trends that have
been in place for a number of years will plans to convert two mutual funds to aged clones of existing mutual funds,
continue,” said Ben Johnson, director of ETFs next year. with slightly lower fees.
global exchange-traded fund research “I have come to the conclusion that The firm is among a handful that
at Morningstar. ETFs are a better value proposition for launched non-transparent ETFs in 2020,
“Investors will continue to show pref- investors,” said Atkinson. and more are expected in 2021.
erence for the largest, most liquid and ETFs have more tax efficiency, trans- Nadig anticipates more cloned ETFs
lowest cost ETFs and we will see more parency and trading flexibility than coming to market in 2021, both trans-
new entrants. Barriers to entry are lower mutual funds and are generally cheaper parent and non-transparent.
than ever,” Johnson explained to own than funds because they have He expects they will outnumber
Helping new entrants is the Securities lower costs for fund sponsors. ETF conversions because retirement
and Exchange Commission’s new ETF plans will continue to favor mutual
rule, which was approved in September 2. MUTUAL FUND CONVERSIONS, funds. Johnson anticipates more active
2019. It allows fund companies to launch CLONES ETF launches.
new ETFs without seeking exemptive “Mutual funds bleed assets, and they
relief for each one. all show up in ETFs,” said Dave Nadig, 3. MORE THEMATIC, ESG ETFs
DFA cited the SEC ETF rule when it chief investment officer and director of Strategists also expect that 2021 will wit-
announced in November the launch of research at ETF Trends. ness the launch of more thematic ETFs,
“More active managers will have to
its first ETFs and plans to convert sev- include ETFs as a means of accessing both passive and active, which focus on
EPStudio20/Shutterstock for industry over the last decade that Johnson. as other investment themes.
environmental, social and governance
eral of its mutual funds into ETFs.
their strategies,” said Morningstar’s
issues, especially climate change, as well
“It’s quite clear as you look at flows
Such ETFs have performed as well
Case in point: T. Rowe Price, which
investors are voting with their feet,
preferring ETFs to mutual funds,” said
like DFA launched its first ETFs in
or better than traditional funds, which
is why they’re attracting more investor
Jim Atkinson, the CEO of Guinness
2020. The T. Rowe Price ETFs are
interest.
Atkinson Asset Management, which has
actually non-transparent actively man-
JANUARY/FEBRUARY 2021 INVESTMENT ADVISOR 15