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Why is index-enhanced ETF considered the “primary form” of active ETF?

When ETFs were first introduced, they were purely passively managed index products. Later, as the market continued to develop and mature, some fund companies incorporated active management strategies into ETF products and launched index-enhanced ETFs.

From the perspective of the activeness of the strategy, index-enhanced ETFs are between completely passive management and completely active management. Index-enhanced ETFs usually have a clear underlying index, but can adjust the weight structure of constituent stocks and invest a certain proportion in non-index constituent stocks, thereby deviating from the underlying index to a certain extent and conducting active management operations, striving to obtain excess returns and surpass index performance.

To use an analogy, the manager of a passive index ETF is like a chef who strictly follows a recipe, meticulously reproducing the dish according to the list of ingredients and quantities. The manager of an index-enhanced ETF, while also referring to the recipe, can adjust the quantities and add some ingredients and seasonings outside the recipe, striving to make a dish that tastes better than the recipe.

Therefore, the Index Enhanced ETF meets the "active management + ETF structure" and is a type of active ETF.

At present, active ETFs listed on exchanges in my country are still in the early stages of development, and all of them are index-enhanced ETFs. The first batch of index-enhanced ETFs were launched in 2021, and by the end of June 2024, a total of 33 index-enhanced ETFs were launched, with a total scale of more than 7 billion yuan.

From the perspective of product distribution, the underlying indices of the current index-enhanced ETFs are all broad-based indices, such as the SSE 50, CSI 500, and Science and Technology Innovation 100, covering different styles of large, medium, and small caps.

From the perspective of managers, there are 18 fund companies in the market that have launched index-enhanced ETFs, of which E Fund Management has a total of 3 index-enhanced ETFs.

As a "post-00s" index enhancement ETF, it is still very young and is expected to become increasingly mature in the future.

On the one hand, it can provide on-site investors with more diversified choices and meet different types of active and passive investment needs; on the other hand, it is convenient to trade and has relatively low costs, and can also be a new choice for over-the-counter investors to allocate index enhancement or active equity funds.

Note: The relevant materials are for reference only and do not constitute fund promotion or investment advice. E Fund Management will not assume any responsibility for the consequences caused by your company's use of such materials.