Exchange-traded funds (ETFs) have revolutionized the investment landscape. Once known for passive strategies, they are becoming increasingly important as carriers of active investment strategies. The benefits such as tax efficiency, lower costs and flexibility in trading make it an attractive choice for investors and asset managers.
In a changing financial world, however, active ETFs are not just a product trend. They are part of a wider macro trend driven by technological innovations, regulatory changes, and the desire for more transparent, cost-effective solutions. This article not only highlights the mechanisms and benefits of active ETFs, but also how modern technologies such as Bavest's stock API, ETF API and Portfolio API are transforming the industry.
The financial sector is on the cusp of a profound transformation. Active ETFs are a key part of a macro trend that is sustainably changing the way investors allocate capital. Three key drivers are shaping this development:
The first active ETFs started around two decades ago, but have only really become established in the last ten years. While traditional active investment funds continue to see cash outflows, the market share of active ETFs rose steadily thanks to their average growth rate of 37% per year.
A key reason for this success is the growing availability of tools such as ETF APIs, which provide real-time data on markets, strategies and trends, enabling investors to make informed decisions.
1. Tax efficiency: A decisive advantage
In contrast to investment funds, which must carry out taxable transactions in the event of inflows and outflows, ETFs use the mechanism of In-child exchange. In this case, shares are exchanged directly for the underlying securities without triggering tax events.
Technologies such as the Bavest API can help investors better understand tax effects and optimize strategies. By integrating historical and current tax data, APIs can provide valuable insights.
2. Lower costs: The appeal for price-conscious investors
Active ETFs have an average fee of 0.65%, which makes them particularly cost-effective compared to traditional active funds (1% or more). APIs such as the Portfolio API offer another advantage here: They enable investors to analyze their total portfolio costs and identify potential savings by switching to ETFs.
3. Flexibility in trading: trading in real time
In contrast to investment funds, which are only settled once a day, ETFs can be traded throughout the trading day. This flexibility opens up a wide range of options:
With the Equity API, investors can track market movements in real time, which allows them to make optimal use of this flexibility.
When an ETF gets too big, managers can struggle to implement their strategy effectively. This applies in particular to niche strategies with limited market volumes. The Portfolio API can help here by monitoring capacity risks in real time and alerting the fund manager.
Banknote margins can be high for illiquid ETFs, particularly during volatile market phases. Tools such as the ETF API enable investors to analyse these costs in advance and act accordingly.
1. Development of new strategies
The development of innovative strategies, for example based on ESG criteria or AI, offers great potential. APIs such as the Bavest API can play a decisive role here by providing data on market trends, performance, and risks in real time.
2. Using Existing Strategies
Fund managers can transfer existing strategies used in traditional funds to ETFs. The challenge lies in performance consistency. The Portfolio API can help to analyze differences between funds and ETFs and make adjustments.
3. Converting funds into ETFs
Converting traditional funds into ETFs offers the opportunity to utilize existing assets and track records. However, this is a complex process that requires technological support. The ETF API can facilitate this process through data integration and analysis.
1. Low fees
The cheapest active ETFs hold more than 325 billion US dollars in assets, while the most expensive only manage 35 billion US dollars. APIs such as the ETF API can help you compare fee structures and identify cheaper alternatives.
2. Liquid underlying assets
Active ETFs that operate on liquid markets, such as large-cap stocks, attract most assets. The share API enables detailed analyses of the liquidity of individual stocks and their suitability for ETFs.
3. Diversification
Broadly diversified portfolios can avoid capacity problems and offer stability. The Portfolio API can help to assess levels of diversification and identify optimization opportunities.
1. Stock API
The Stock API provides real-time stock market data, including price movements, trade volumes, and fundamentals. For active ETFs that rely on individual stocks, this is an indispensable tool for identifying opportunities and minimizing risks.
2. ETF API
The ETF API provides detailed insights into ETFs, including their composition, performance, and trading costs. It helps investors make well-founded decisions and find ETFs that meet their investment goals.
3.Portfolio API
The Portfolio API analyses the structure of a portfolio and assesses diversification, costs and risks. Asset managers can use this API to optimize portfolios and identify potential vulnerabilities.
The market for active ETFs will continue to grow, supported by technological innovations and changing investor preferences. APIs such as Bavest play a central role by making the industry more transparent, efficient and data-driven.
With the right strategy, supported by advanced technologies, asset managers can not only benefit from this trend, but also actively shape it. Active ETFs are more than just a product — they are a key to the future of the investment industry.
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