It’s active AND passive (not active OR passive)

The debate on active versus passive has gone on for years, with many investors loyal to one camp of the other. But… Why not use both? Christian Obrist, Head of iShares in Australia echoed these sentiments when we asked about the biggest trends in ETFs today.

ETFs are now being used to fulfil a diverse range of roles by investors and managers of all stripes says Christian: “In the past it would have been in a much smaller subset of users, whereas today you have retail investors, super funds, insurance companies, and even government entities using ETFs.” Read on, or watch the interview to hear why it should be active AND passive, not active OR passive.

iShares has made investing in their international ETFs simpler. Find out more

Edited transcript

What are the biggest trends in ETFs today?

It's really the fact that most investor types are now ETF users. That's the most dramatic trend for me, whereas in the past, it would have been in a much smaller subset of users. Whereas today, you have retail investors, you've got super funds, you've got insurance companies, and even government entities use ETF.

The usage has become very widespread and I think that's really testament to the benefits and the efficiencies of ETFs as investment tools.

ETFs in the equity space only make up about 6% of the market. Our own calculations put that number at about 3% to 4% in the equity world. In fixed income, that number is less than 1%. We have to remember that ETFs are still a fairly small part of the ecosystem. The other thing is if you look at the fact that for every dollar that's traded in a passive vehicle, you still have $22 trading in an active vehicle. I think that says a lot.

Making the choice between active and passive investing

Well, I think really, it's not about active versus passive. It's really about active and passive, because we really still feel that there's place for both in investing. Like I said before, we have a lot of active investors using an ETF as a tool within their portfolio.

For example, using an ETF to make a precision investment, using an ETF to cover off an asset class. You can use these in combination with active instruments, or you create an active product by using the building blocks of ETFs and expressing views which means it's still an active product.

So the ETF does not necessarily take anything away. In fact, it enhances the choice of investment tools for active investors.

iShares has made investing in their international ETFs simpler. Find out more