Baillie Gifford has launched its first active ETF range in the US, marking a notable inversion of the usual direction of travel in the active ETF market.
While much of the recent activity in Europe has involved large US managers exporting active ETF strategies and infrastructure across the Atlantic, Baillie Gifford’s move goes the other way. The Edinburgh-based investment manager has chosen the US as the launch market for its first actively managed ETF suite, despite being one of the UK’s best-known long-term active investment houses.
The new range comprises four actively managed equity ETFs: the Baillie Gifford Emerging Markets ETF, Baillie Gifford International Concentrated Growth ETF, Baillie Gifford International Alpha ETF and Baillie Gifford Long Term Global Growth ETF. Two of the strategies, International Concentrated Growth and Long Term Global Growth, have been converted from existing mutual funds.
Joe Stellato, head of US Wealth at Baillie Gifford, said: “Active ETFs are growing rapidly, but genuinely differentiated, long-term growth offerings remain scarce in an ETF wrapper – particularly in emerging markets and international equities, where there are only 24 out of thousands of ETFs. That’s why now is the right time to bring our growth investment approach to ETFs. We see a clear need to fill that gap while continuing to build our U.S. presence and demonstrate our commitment to being a true partner to our wealth clients”.
The move follows Baillie Gifford’s appointment of Jamie McGregor as director of ETF capital markets last year, a newly created role designed to lead the firm’s entry into the US ETF market. At the time, Baillie Gifford said it had submitted preliminary filings with the US Securities and Exchange Commission for an initial suite of actively managed ETFs.
For European ETF watchers, the significance lies less in the products themselves than in the choice of launch market. Baillie Gifford is not entering ETFs through its home region, but through the world’s largest and most developed active ETF market. That underlines the continued pull of the US, where the ETF structure benefits from scale, adviser adoption, deeper liquidity and tax advantages that are not replicated in Europe.
Our view
David Batchelor, senior analyst at QuotedData, said: “One of Europe’s best-known active managers has chosen the US as the place to make its ETF debut, which says a lot about where the economics, distribution and investor demand are currently strongest. It highlights the more difficult economics facing European active managers considering ETF launches in their domestic market. Europe’s active ETF market is growing quickly, but distribution remains more fragmented, cross-border access is less straightforward and the business case for new entrants can be harder to justify”.
