Merrill Lynch to triple total active ETFs: FT

Bank of America’s Merrill Lynch plans to triple its range of active ETFs over the next three to five years, a testament to financial services firms’ efforts to meet growing demand for these products.

The firm aims to increase its active ETF offerings from 100 to 300, according to an article that first appeared in FT sister publication Ignites.

The move comes amid a record year for ETF launches. According to ETFGI data, issuers introduced 1,063 new ETFs in the first seven months of 2024, surpassing the previous record of 988 set in the same period in 2021. Actively managed funds led with 461 new products.

Stephen Patrickakos, head of traditional investments, told Ignites that the firm plans to select ETFs for its platform by evaluating their size and performance.

“With a firm of our size, if (financial advisors) start to commit and put money to work, we could become too concentrated in an ETF or any structure, very quickly,” he told Ignites.

ETF growth continues

Merrill’s expansion plans include adding ETF versions of mutual funds already featured on its platform, as well as new strategies focused on large-cap, small-cap and growth stocks. However, Patrickakos noted to Ignites that certain strategies, such as small-cap emerging markets, face capacity constraints in the ETF structure that do not exist for mutual funds.”because ETFs can’t approach new investors like mutual funds can.”

The facility’s move aligns with broader industry trends. Globally listed active ETFs hit a new milestone in July, with assets under management climbing to $974.3 billion, according to ETFGI data. This represents a 32% increase in year-to-date assets to $739.9 billion at the end of 2023.

“We are happy to do that, provided we are given enough time to prepare and if it makes more sense to operate a strategy in an active ETF,” Patrickakos said of introducing ETF versions of existing mutual funds, Ignites reported. “We’re very, very supportive.”

Merrill’s plans reflect the growing acceptance of active ETFs among major companies. Nate Geraci, president of The ETF Store, told Ignites that wirehouses have become increasingly comfortable with the ETF deck, and issuers are now offering their top portfolio managers and flagship investment strategies through the structure.

Ignites also reported that Merrill is monitoring applications for ETF share classes. More than 20 firms have applied to offer ETFs as share classes for their existing mutual funds, and 72 percent of advisors say they want access to ETF share classes, according to Ignites Research.

The story continues

Patrickakos told Ignites that regulatory approval for ETF share classes would allow for “much less complexity” in offering these products.

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