New Macquarie Active ETFs - Impressive, page-2

It's actually (rather counter-intuitively) the opposite. These products are in my opinion (as someone who's worked in funds mgmt) not superior, and infact worse and more expensive than regular ETFs. The fee structure is extremely misleading...

As a quick explainer -
Yes - The base fee is very competitive (as low as 3bps) - this is good - I'll get to why later.

So what's the bad? Rather than strictly tracking the index, the funds loosely hug the index taking algorithmic tilts which instead ensure tracking error of circa 1%.

What this means, is that rather than doing any quant analysis to add value, they're effectively flipping a coin each year with 1% of the fum. Some years you outperform 1%, other years you underperform by 1%.

In the years you outperform, congrats, you pay them a 20% management fee. In the years you underperform, you pay them no management fee.

This outperformance is literally a coin flip. What that means, is that in the long run, you actually pay more in management fees, and get a product with higher volatility, which still tracks long term index returns.

The genius in this product is the marketing and how it makes people believe Macquarie are only rewarded for outperformance. They're being rewarded for tracking error and adding volatility, which is the opposite of what you want to happen.

So what's the good that could come from it? All the existing passive ETF's may respond to the lower base fees by cutting their fees. This could get us as customers a better deal.