A world of active ETF opportunities

22 Nov 2023
 

ETFs have become the building blocks of a diversified portfolio, providing exposure to a broad range of asset classes – including hard-to-reach markets around the world.

With a track record of more than 30 years managing funds, Macquarie now offers listed access to some of its most popular funds as active ETFs. 

As an experienced fund manager searching the world for opportunities to enhance client outcomes, Macquarie provides access to those active investment strategies via an active ETF structure.  

Around two in three wealth advisers already use ETFs as part of the client investment mix,¹ as this investment vehicle makes it easier to construct and rebalance portfolios in line with evolving investor needs. ETF investors enjoy the simplicity of diversifying or rebalancing their portfolios with just a few trades, and access to specialised investment strategies to meet their investment goals.  

There are hundreds of ETFs now available in Australia on stock exchanges, including global equity ETFs, fixed income ETFs, infrastructure ETFs, and ETFs covering niche sectors. That includes many types of stocks and bonds that would be hard to buy or sell individually. Demand for active ETFs in Australia is increasing as active fund managers continue to launch new products, giving investors even more choice. 

Adding institutional depth to Australia’s ETF momentum

Today, traditional unlisted managed funds and other platform products remain the largest managed investment product in Australia – with $A920 billion in AUM compared with ETFs at $A130 billion.² However, managed fund flows have been trending away from unlisted funds toward listed products over the past five years.³ And the Australian ETF market is forecast to grow a further 22% year on year through to 2027.⁴

Macquarie now offers three flagship funds as active ETFs: the Macquarie Dynamic Bond Active ETF (Managed Fund), Macquarie Income Opportunities Active ETF (Managed Fund) and Macquarie Walter Scott Global Equity Active ETF (Managed Fund). These active ETFs all leverage the global strength of fixed income and equity management teams to provide investors and their advisers with a broader range of investment strategies. 

“We can see there’s demand for active ETFs. And we could see the opportunity for investors to access some of our flagship strategies through an ETF structure,” says Brett Lewthwaite, Chief Investment Officer and Head of Fixed Income at Macquarie Asset Management. 

“We believe we can bring additional quality, along with institutional depth, to the active ETF market.”

Proactive investment strategies

Macquarie’s fixed income team has seen enough ‘black swan’ events to know the importance of active management. The Macquarie Income Opportunities Fund has been tested through many challenging market conditions over the past 20 years – including the GFC, the European Sovereign Crisis, global banking collapses, and COVID. 

“We feel the responsibility of managing other people’s money, so our approach is rigorous, thoughtful and sensible,” observes Lewthwaite.  

Two Macquarie fixed income funds are now available as active ETFs, giving investors simpler access to diverse fixed income instruments around the world – including government bonds, corporate bonds, and emerging market bonds. With both funds, there is a primary focus on liquidity.

“We know liquidity can dry up in a stressed environment. Thanks to research we’d done in the late 90s, and refreshed multiple times since, the Macquarie Income Opportunities Fund has been well equipped to navigate multiple stressed market environments” says Lewthwaite. A testament to this approach is the unbroken track record of regular distributions.

Macquarie’s Dynamic Bond Fund is also designed to adapt to market risks and opportunities across the global bond spectrum, balancing return and diversification objectives. 

Macquarie’s fixed income team draws on global market expertise. “The interconnectedness of our global team is a real advantage,” says Lewthwaite. “These funds sit within a very disciplined global framework.”  

Searching the world for tomorrow’s winners

Macquarie has always focused on offering access to high quality investment capabilities – not just internally, but also bringing the best capabilities from partners around the world. 

Walter Scott is one example – Macquarie first introduced Walter Scott funds to the Australian market in 2005. 

“We saw their quality long-term growth characteristics as a good match for what advisers told us they were looking for,” says Luis Sarmiento – Senior Investment Specialist, Macquarie Professional Series. 

Headquartered in Edinburgh, Walter Scott ​​provides investors with exposure to global equities with strong growth characteristics. It has a bias towards quality, with a focus on strong balance sheets, and aims to build portfolios capable of long-term wealth generation.  

This means that the Walter Scott Global Equity Fund strategy has a very patient ‘buy-and-hold’ approach in building a concentrated portfolio of just 40 to 60 companies. The team is also generalist – they do not specialise in any one region, country or sector, so they understand how one sector or market can impact another. 

Through the Macquarie Walter Scott Global Equity Active ETF (Managed Fund), ETF investors can now access a diversified mix of companies with long-term growth potential easier than before. That includes tech, healthcare, industrial and consumer brand equities in the US, Europe and Asia. 

“Walter Scott is looking for future winners, so the team seeks out structural tailwinds rather than thematics,” Sarmiento explains. “They’d be more likely to invest in picks and shovels during a gold rush – it’s a lower risk approach, seeking long-term earnings growth.” 

Democratising access to ‘alpha’

Macquarie’s investment teams and external fund managers are always looking for opportunities to outperform the market or benchmark. And Macquarie ETFs will provide easier access to actively managed investments, backed by global expertise and local market knowledge. 

Sarmiento says Macquarie will continue evolving its active ETF offering to provide a range of products to complement investors’ existing strategies and portfolios. In doing so, the investment manager can give more investors access to its rigorous research and deliberate investment thinking with the convenience of online access to professionally managed funds operated with specialist expertise.

“Active ETFs continue to provide investors and their advisers with easier access to a diversified range of investments and tools that can help them achieve their wealth management goals, he says.  

Important information

All investments carry risk. Different investments carry different levels of risk, depending on the investment strategy and the underlying investments. Generally, the higher the potential return of an investment, the greater the risk (including the potential for loss and unit price variability over the short or long term). Find more information on the risks of investing in an ETF in the Product Disclosure Statement for the ETF. This and the Target Market Determination for the ETF should always be considered before deciding to invest in any ETF. 

The Macquarie Walter Scott Global Equity Active ETF (Managed Fund) is a separate class of units in the Walter Scott Global Equity Fund (ARSN 112 828 136), the Macquarie Income Opportunities Active ETF (Managed Fund) is a separate class of units in the Macquarie Income Opportunities Fund (ARSN 102 261 834) and the Macquarie Dynamic Bond Active ETF (Managed Fund) is a separate class of units in the Macquarie Dynamic Bond Fund (ARSN 101 815 141).  A separate class of units is not a separate managed investment scheme.

The Macquarie Walter Scott Global Equity Active ETF (Managed Fund) is designed for consumers who are seeking capital growth and income distribution; are intending to use the Fund as a core component, minor allocation or satellite allocation within a portfolio; have a minimum investment timeframe of seven years; have a high or very high risk/return profile for that portion of their investment portfolio, and require the ability to have access to capital within one week of request.

The Target Market Determination (TMD), available at macquarie.com/mam/tmd, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.

Future results are impossible to predict. This document contains opinions, conclusions, estimates and other forward-looking statements which are, by their very nature, subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in such forward-looking statements.  

Past performance information shown herein, is not a reliable indicator of future performance. 

No representation or warranty, express or implied, is made as to the suitability, accuracy, currency or completeness of the information, opinions and conclusions contained in this document. In preparing this document, reliance has been placed, without independent verification, on the accuracy and completeness of information available from external sources. To the maximum extent permitted by law, no member of the Macquarie Group nor its directors, employees or agents accept any liability for any loss arising from the use of this document, its contents or otherwise arising in connection with it.