• Crypto resurgence
• Public/private market convergence
• The rise of Active ETFs
• ESG labelling changes
• Consolidation in the asset management industry
Here’s what Kenneth has to say about each theme. Let me know if you would like to speak with him further about any of these themes specifically, or 2025 more broadly.
Crypto resurgence continues – can it go mainstream?
“Donald Trump's reelection has helped propel Bitcoin prices to record levels. The first spot bitcoin ETF was cleared and launched in the US in January this year to much fanfare, but there is no guarantee European regulators will follow suit. Regulatory support has varied between markets, but even those regulators most skeptical of crypto, such as the FCA in the UK, are facing increased pressure to relax their stance.
Greenlighting spot crypto funds which can be sold to retail investors may be seen as an implicit endorsement of a highly speculative form of investment. However, it is hard to argue that the millions of crypto investors are currently better served operating with scant oversight at all outside of the traditional financial system, in an asset class famed for its poor governance."
Public/private market convergence
"Asset managers are paving the way for broader access to private investments by innovating with vehicles like ELTIFs or even wrappers famed for their liquidity like ETFs. Industry giants like BlackRock and Legal & General IM have been positioning themselves for this convergence, while the UK government has announced the ‘world’s first’ private stock market’. Investors should remain wary. The outsized returns we have seen in some private assets may well be a mirage which evaporates before less sophisticated investors even arrive.
As private assets become more accessible, the market for them is likely to become more efficient, with fewer mispriced assets and less profit opportunities. High fees, the erosion of the liquidity premium and higher correlations with other assets will also dampen the appeal. Exactly how providers offer liquid exposure to illiquid assets will remain the key point of focus as options grow.”
Active ETFs Will Continue to Gain Traction (But not as much as you might think)
“Under the cover of the relentless growth of the broader ETF market, Active ETFs have begun to gain traction amongst investors in Europe and expect this to continue in 2025. Trailblazers such as JPMorgan, have been joined by a string of traditionally active investors such as Janus Henderson and Robeco looking to ride the coattails of the ETF boom. Expect more entrants in 2025, including those already established in the booming active ETF market (such as ARKK).
That said, those looking at the booming US market and expecting similar asset growth here will be disappointed. While most market participants agree that the ETF wrapper is superior to the traditional mutual funds, the marginal benefits are as clear cut as they are in the US, where ETFs retain a clear tax advantage. Unlike in Europe, US regulators permit semi-transparent active ETFs which are not forced to disclose daily holdings. That said, the vast majority of assets remain in “shy” or benchmark aware strategies in both regions and despite the likely entrance of more active players, we expect this to continue.”
More ESG Regulation, More Confusion
“The effects of ESMAs new guidance on naming for sustainable funds will be felt in 2025 - expect a raft of fund name and strategy changes. The guidance is intended to help bring clarity by defining when a fund can be labelled ESG, but the move is still likely to muddy the waters further. Some existing funds will be unaffected while others will need tweaks to their investment strategies to allow them to retain an ESG tag. However, the real pain point is how to classify funds which clearly incorporate sustainable criteria but don’t meet ESMA’s sustainable thresholds.
Unable to label this distinct and popular set of funds as ESG, expect asset manger’s marketing departments to work overtime to come up with some creative naming solutions for funds which fall between the two stools of ‘sustainable’ and ‘not sustainable’.”
Continued Consolidation in the Asset Management Industry
“We expect asset managers to continue to feel the pinch in 2025. Stagnant assets under management, intense downward pressure on fees and rising costs will continue to drive consolidation across the asset management industry. We also see a race for scale in the wealth management industry, which despite some large acquisitions in recent years remains fragmented, particularly amongst the smaller players."
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