This Tuesday, Morningstar updated its view of the exchange-traded fund (ETF) market and the concentration and diversification trends in the equity market, in addition to presenting the latest report from the Morningstar family of funds, where they analyze and rank according to several different criteria to the 100 largest asset managers in Europe, including four Spanish ones (Santander, BBVA, CaixaBank and Ibercaja).
José García Zárate, fund analyst of the company, explains that “the concentration of the stock market is not something particular at the moment”, although he recognizes that “this time the concentration has reached higher levels than in previous periods and has sold a smaller number of companies, while in other periods it has been more sectoral. “This is something that does not only happen in the United States. This happens in all regions,” says the expert.
Regarding the implications this situation could have, García warns that “the greater the concentration, the greater the risk. If market sentiment changes, the fall could be greater.” For the manager and the investor this can also be decisive. “For the active manager, it is difficult to ignore inertia and market concentration, although much depends on the category and style of investment, because the value tends to do it more than blendFor example. Not riding these winning horses can work against unitholders’ interests,” García suggests. “Sometimes active management is not so much about finding the hidden gem but knowing when to stick to the clues, ride on inertia and stop doing it when these potential risks are anticipated,” he adds.
Regarding ETF market trends, flows into this type of assets continue to increase. In the last quarter, the third of 2024, there was a new entry record money in Europe, with 63 billion euros net. Thus, the assets under management of these products now amount to 2 billion euros on the Old Continent.
Among the trends identified in recent months, we appreciated strong demand for funds equally weighted, who are those who balance the values that compose it. “This was especially seen in September and it is the reaction to the declines at the beginning of August and to the perceived risks of the great concentration which is being generated on the American stock market,” explains the agency.
Likewise, they indicate that there are many capital flows into investment vehicles. small capitals North Americans. In fact, these flows mark a record since the last quarter of 2020. “Investors see a clear opportunity in a segment that has been left behind and stands to benefit from Fed rate cuts,” says García.
Finally, they addressed the emergence of Actively managed ETF“which serve as an entry point for managers who do not compete in the active management segment but wish to enter the index fund sector,” they explain. 7 to 8% of flows in Europe go to these assets while in In the United States, this figure reaches 25 to 30% of money in motion, already assuming a market share of 8% compared to 2.2% on the Old Continent. The main advantage of the United States is that it benefits from better taxation than traditional funds.
“In Europe, the cost is between a passive fund and a traditional fund. What we need to see is whether the market is willing to pay more for an ETF, even if they don’t care as much about it. alpha as a traditional vehicle”, they indicate. “Another problem to be resolved is that these vehicles, at the moment, cannot be closed to new investors and, depending on their investment universe, they may have problems of capacity,” they conclude.
