ghostcarp| ESG fund clearing sweeps U.S. ETF market

Transferred fromGhostcarpFinancial sector

This article is derived fromGhostcarpFinancial sector

The US exchange traded fund (ETF) market, which focuses on ESG, is struggling.

Shaheen Contractor, senior ESG analyst, saidGhostcarpSo far, at least 27 ETF classified as environmental, social and governance principles (ESG) have been liquidated this year. By comparison, there were only 36 cases in the whole of last year.

The prospect is not optimistic. The contractor says the trend is likely to continue, especially if there is strong opposition from the Republican leadership to the investment strategy.

"complex themes that are difficult to raise money are at greatest risk," she said.

Against the backdrop of increasing fund closures, only two ESG ETF have been launched in the Americas this year, the fewest since tracking the data about five years ago. The number of fund issuance fell from a peak of 124 for the whole of 2021, according to contractors.

She says the industry is struggling because cash flow from ESG-focused portfolios has fallen sharply and the market has matured and most large asset managers have launched a batch of such funds.

Contractors say actively managed ESG ETF tends to charge higher fees and account for more than half of fund turnover this year. However, the analyst said active funds provided "more flexible strategies, which could become increasingly important as asset managers try to stand out in an increasingly competitive market."

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