Long considered a niche product, active ETFs have now established themselves as a key component of asset management in Europe. Their rise reflects both a shift in investor behavior and a gradual reevaluation of certain pillars of passive management.
In this interview, Richard Pandevant, CESGA®, co-manager of long-only funds and head of ESG at Exane Asset Management , discusses in detail the factors driving this transformation and how Exane Asset Management is positioning its management strategy in this new environment.
Active ETFs are no longer a niche product. What explains their rise and their now-central role in equity management in Europe?
The rise of active ETFs is primarily part of a clarification of terminology and practices. For years, ETFs and passive management were conflated, even though they are based on different principles: an ETF is an investment vehicle, whereas passive management is an investment approach.
This distinction is now becoming clearer to both institutional investors and distributors. It is accompanied by increased demand for solutions that combine ease of access, transparency, and disciplined management.
At the same time, passive management is facing greater scrutiny regarding its ability to offer truly diversified exposure. Index construction sometimes leads to significant concentrations in certain sectors or themes. The examples of technology, artificial intelligence, and semiconductors illustrate this phenomenon: dominant weightings in indices can create a significant concentration risk for investors.
Added to this is another, more structural issue: choosing an index-tracking ETF indirectly amounts to selecting an index methodology. This introduces a form of investment bias, sometimes akin to indirect but uncontrolled stock picking, as it is fixed over time.
In this context, active ETFs emerge as an intermediate solution: they combine the operational efficiency of ETFs (liquidity, transparency, accessibility) with an active management approach aimed at generating alpha.
Exane Asset Management has historically been a conviction-based manager of European equities. What prompted you to launch your strategies in the active ETF format today?
The starting point was a shift in client demand. More and more investors want access to active strategies via ETF formats, for reasons of ease of use, cost, and portfolio integration.
Exane Asset Management already had a proven track record of conviction-based management of European equities, grounded in fundamental analysis and strong portfolio construction discipline.
The portfolio manager emphasizes that this strategy has a solid long-term track record, having outperformed the vast majority of competing funds as well as market ETFs over the same period.
Consequently, the challenge was not to transform the strategy, but to make it accessible through an ETF structure without altering its core principles. The goal is therefore to “package” an existing investment strategy into a format that has become the market standard, without changing the investment process or philosophy.
To what extent does the transition to the ETF format change—or not change—your investment process?
The transition to the ETF format does not alter the investment process.
The strategy remains fundamentally an active, conviction-based approach, based on sector expertise and disciplined portfolio construction.
The only difference lies in the distribution vehicle: it is the same fund, with the same management team and the same investment decisions.
In other words, the active ETF does not change the way we invest, but only the way investors access the strategy. This allows us to maintain the consistency of the process while broadening the base of potential investors.
How do you view daily portfolio transparency, which is often seen as a benefit for investors but also as increased exposure to your active management and alpha?
Daily transparency is often presented as a disruption to active management, but in reality, it is part of a continuum.
In the case of Exane Asset Management, some of this information was already shared with certain institutional clients upon request. The European regulatory framework has simply extended this practice to all investors.
In practice, positions are published with a delay in accordance with regulatory requirements, via official distribution channels, notably the asset management firm’s website.
From a management perspective, this does not change how the portfolio is constructed. The philosophy remains the same: a committed, conviction-based management approach, with active security selection, but guided by parameters regarding diversification and risk management.
Beyond access to the product, how does this active ETF format transform the way a financial advisor or asset manager constructs, balances, and manages European equity exposure within a multi-asset allocation?
The main impact lies in the portfolio architecture.
The active ETF allows a European equity strategy to be used as a “core” building block, easily integrated into an overall allocation. This reduces the need to combine multiple secondary decisions related to style, sector, or factors.
The idea is to simplify the decision-making process: instead of making multiple trade-offs, the investor can rely on a European equity exposure that is already diversified and actively managed.
This approach is particularly useful in strategic reallocation scenarios, such as when an investor reduces geographic exposure or adjusts their overall equity exposure. The active ETF then serves as a tool for rapid and consistent adjustments.
Furthermore, Exane Asset Management emphasizes a key differentiator: management is grounded in a strong fundamental approach, with sector experts involved in portfolio construction. This contrasts with some of the active ETFs on the market, which are often more quantitative in nature.
The European active ETF market has nearly tripled in two years.
In your view, where will it be in five years, and what position does Exane Asset Management intend to occupy in that market?
The current momentum is seen as structural rather than cyclical.
Several trends are driving this growth: the rise of direct investing, the increasing sophistication of multi-asset allocations, and the search for more flexible solutions that bridge active and passive management.
In this context, the market could evolve toward a three-pillar architecture:
- traditional active management,
- passive ETFs,
- and active ETFs as an intermediate solution.
For Exane Asset Management, the goal is to establish a lasting presence within this third pillar by capitalizing on its long-standing expertise in European equities and its ability to build portfolios that are resilient to market cycles.