Private market investments for high net-worth individuals, active fixed-income ETFs and quant-based strategies are likely to be the three key areas of growth across the investment industry over the next few years, according to Goldman Sachs Asset Management’s (GSAM’s) Hilary Lopez.
Lopez, who is head of the firm’s EMEA third-party wealth business, says the firm is seeing “huge growth” in demand for active ETFs on the public side of the business, in particular, thanks to the flexibility and transparency the vehicle offers.
As such, GSAM has “a very robust pipeline” of launches in the space over the course of 2025, following on from the inception of two high-yield bond active ETFs in February this year.
“We can see the growth of this [active ETF] market taking hold internationally – particularly within the equity sectors, and ETFs taking an increasingly bigger share of this asset class,” she explains.
“This has been a trend for a while, but in particular over the past three years. We see a fantastic opportunity for active ETFs.”
But while attention seems to be focused on equity products within the space, Lopez says the real growth opportunity for GSAM currently lies within the fixed-income market.
“Investors are looking at their strategic allocation to fixed income and, in many ways, they are now agnostic to the vehicle structure. For them, it’s a case of finding the most efficient vehicle possible,” the wealth business head explains.
“GSAM has a long history of active fixed-income management; it’s a very substantial proportion of our active assets, and our assets under management.
“We think ETFs and active ETFs for fixed income are very compelling for clients. There are numerous advantages to the ETF wrapper, such as flexibility and transparency. Fixed income accounts for approximately $50bn (£39.47bn) of assets in terms of today’s active ETFs, but we think that’s going to grow substantially over the next five years – we could certainly see it double in the next few.”
According to Fidelity International’s Professional Investor DNA Survey, published in February, 61% of intermediaries expect to increase their allocation to active ETFs over the next 18 months. Reasons cited by respondents include reduced costs, alpha generation and access to specialist areas of the market.
And yet, while the European ETF market surpassed $2trn assets for the first time last year, according to Morningstar data, active ETFs account for just 3% of the wider ETF market in Europe.
Lopez says: “It’s a more complex market today. Equity markets are at record highs, monetary policy is constantly being reviewed.
“Why is this driving an active ETF structure? Because some of our wealth management clients want to marry the flexibility of an ETF wrapper with active management.
“Markets may not move in a straight line going forward and having that active manage-ment element will be important in terms of preserving capital and – on the fixed-income side – avoiding defaults.”
“I think it’s a consequence of the shifting macro environment, and clients being very aware of diversifying their investments to preserve capital and manage risk,” she adds. “These are the tailwinds behind active ETFs being a really interesting area. Because they offer the benefit of flexibility and transparency, as well as a lower cost, but they are still actively managed.”
Read the rest of this article in the March issue of Portfolio Adviser magazine