Active ETFs have become increasingly popular with investors, and several fund houses in Europe are launching new products to capture this demand. But how have such products performed in the first half of 2024?
The active ETF universe is still modest in Europe. According to a Morningstar report from April, these funds account for only 2% of the total ETF assets across the continent. If we include different ETF share classes across multiple currencies, there are 170 active ETFs available to European investors. Of these, 10 have been launched in 2024.
For this review, we are looking at the oldest share class versions where multiple ETFs exist. In some cases, where the oldest share class is unavailable, we have included the share class with a Morningstar Medalist Rating. In the few cases where neither was available, we have selected the highest performer among the currencies.
It is also important to note that the chosen currency for your share class can make a significant difference. For example, the highest-performing active ETF overall, JPM Japan Research Enhanced Equity ESG ETF, is up 22.70% in Japanese yen. However, the oldest share class of the same product, listed in US dollars, has only returned 5.81%. The yen has fallen sharply against the dollar this year, with authorities in Tokyo forced into measures to prop up the Japanese currency.
The top 10 performers are all equity strategies investing across Japan, Europe, US, emerging markets and globally. We also find Europe, emerging markets and global ETFs at the bottom, alongside long/short equity and bonds.
Only 24 active exchange-traded funds had negative returns over the period and six of these were in the double-digits. In contrast, 21 ETFs saw growth higher than 10%.
Beware The 'Shy-Active' ETF
While the ETFs highlighted here are more active than their passive counterparts, the recent Morningstar report Active ETFs in Europe: Small, Shy, and on the Rise highlights such vehicles might be less active than you'd expect.
"Most of the active ETFs available in Europe are 'shy-active', with lower active share and/or tracking error than similar active open-end funds," it says. "As a result, investors should moderate their excess returns expectations from such products."
When looking at the 20 largest equity active ETFs against a category-specific, representative ETF, the analyst team found half of them were less than 50% active (on a historical average).
Which Active ETFs Have Performed Best?
Among the best active ETFs in the first six months of 2024, those investing in US and global equities are featured the most, with three ETFs each. European equities feature twice.
Fidelity Sust Rsh Enh Jpn Eq ETF JPY Acc
The best performer, though, was Fidelity Sustainable Research Enhanced Japan Equities ETF – the Yen iteration. This Morningstar Gold-rated ETF has returned 21.28% up until June 26, 2024. It is also the third cheapest ETF among the best performers, with an ongoing charge of 0.25%.
Lyxor ETF Wise Quantitative Strategy
With a 19.12% return over the same period, the second-best performer was Lyxor ETF Wise Quantitative Strategy. The euro ETF has a Europe large-cap blend focus and launched in 2007. It is the oldest active ETF in our dataset. Its charge is 0.60%.
Invesco Quantitative Strategies ESG Global Equity Multi-Factor ETF EUR PfH Acc
The third ETF in the list is Invesco Quantitative Strategies ESG Global Equity Multi-Factor UCITS ETF – one of the three global equity ETFs in the list. The product has a 5% exposure to Magnificent Seven stock Nvidia (NVDA) and has returned 17.86% since the start of January. The Invesco ETF's ongoing charge is 0.30%.
Which Active ETFs Have Performed The Worst?
The bottom table of active ETF performance shows more variation than the top performers. There are no repeated categories, and most asset classes are represented – from equity and fixed income to alternatives and property.
JPM Equity Long-Short ETF USD Acc
The worst-performing active ETF so far this year has been JP Morgan Equity Long-Short, which has fallen 22.37%. It is also among the more expensive ETFs in the list, charging 0.68%. It was launched in 2017.
JPM Managed Futures ETF USD Acc
The second-worst performer was an alternatives ETF from JP Morgan, launched on the same day as the above Equity Long-Short product. JP Morgan Managed Futures is a product that invests in both long and short exposure across asset classes, and so far this year, it has fallen 15.15%. The ongoing charge is 0.57%.
HSBC Economic Scale Worldwide Equity ETF
Third from the bottom is an ETF that invests in global large-cap value equities. HSBC Economic Scale Worldwide Equity was down 13.38% on June 26 and charges 0.25%. It launched in 2014.
