Columbia Threadneedle has launched an actively managed emerging markets ETF in Europe.
The CT QR Series Emerging Markets Equity Active UCITS ETF (QREM) was admitted to trading on the London Stock Exchange today (4 September) and is also listed on Deutsche Börse Xetra and SIX Swiss Exchange. It has a total expense ratio of 0.30%.
QREM is the fourth fund in Columbia Threadneedle’s European ‘Quant Redefined’ (QR) active ETF range, alongside strategies investing in US, European and global equities.
The new fund uses a systematic approach to stock selection, assessing companies against three broad factors – quality, catalyst and value – with the importance of individual measures varying between industries.
It aims to outperform the MSCI Emerging Markets Index while maintaining a tracking error of between 3% and 5%, giving the managers scope to deviate from the benchmark without taking large country or sector bets. Christopher Lo, portfolio manager of the ETF, said emerging markets were particularly suited to the approach because of the diversity of companies and what Columbia Threadneedle sees as significant market inefficiencies.
He said the systematic research process was designed to identify companies with stronger prospects while avoiding weaker businesses, providing active stock selection within the liquidity and transparency of an ETF structure.
The launch extends a European ETF operation that Columbia Threadneedle has built rapidly this year. Its four QR strategies have already attracted around $388m of assets, according to ETF Stream, while the wider investment group manages around $773bn.
Michaela Collet Jackson, head of distribution and marketing for EMEA at Columbia Threadneedle, said the fourth launch reflected growing client demand for active strategies combining transparency and lower-cost delivery through the ETF structure.
The move into emerging markets is also significant because it takes Columbia Threadneedle beyond the developed-market exposures that formed its initial European ETF range.
Our view
David Batchelor, senior analyst at QuotedData, said: “Columbia Threadneedle’s move into emerging markets makes sense. If active management is going to justify charging more than a conventional tracker, a less efficient and more heterogeneous market should provide a better hunting ground in which to demonstrate its value. Emerging markets span very different economies, sectors, regulatory regimes and corporate governance standards, while the quality of information available to investors can also vary considerably. That creates greater scope for skilled managers to distinguish between stronger and weaker companies, rather than simply accepting the weightings imposed by an index. The challenge, of course, is proving that those opportunities translate into consistent outperformance after fees”.
