Active ETF supply and demand has accelerated in 2024. We believe a new active product from iShares is one to watch.
The iShares International Country Rotation Active ETF (CORO), which launched today, will actively allocate to several dozen iShares single-country ETFs. CORO will be managed by the BlackRock Model Portfolio Solutions (MPS) team. It will express changing views on internationally developed and emerging market countries.
A Model Building Block
According to BlackRock, the fund was designed as a model building block. We think it is a matter of time before the firm uses CORO as an efficient approach to tactically investing internationally. The MPS team manages $178 billion globally, including a range of ETF-based multi-asset strategies used by advisors. However, in the interim, investors can directly tap into BlackRock’s expertise.
The iShares US Industry Rotation Active ETF (INRO ) is another fund run by the BlackRock model team. This ETF launched in March 2024 and remains small, with just $17 million in assets. INRO holds individual stocks with top-10 positions in Honeywell and T-Mobile US, not just Apple, Microsoft, and Nvidia typically found in large-cap equity ETFs. We expect BlackRock’s model team will further leverage active ETFs in 2025.
A Focus on Single-Country ETFs
Many ETF investors gain exposure to international equities through broad regional ETFs. For example, the iShares Core MSCI EAFE (IEFA ) and the iShares Core MSCI Emerging Markets ETF (IEMG ) manage $120 billion and $80 billion, respectively. Japan and China are the largest country weightings for IEFA and IEMG, but the funds provide exposure to other countries.
While some investors take a strategic approach to international investing using IEFA, others tilt using the iShares MSCI EAFE Value ETF (EFV ) or the iShares MSCI EAFE Growth ETF (EFG ). Indeed, BlackRock took a more favorable stance on international value in September for its model portfolios.
In contrast, CORO has the flexibility to hold more targeted ETFs, such as the iShares MSCI United Kingdom ETF (EWU ) and the iShares MSCI India ETF (INDA ). Some investors believe smaller international markets such as India and the U.K. are better positioned to appreciate in value; EWU and INDA incurred net inflows year-to-date through November.
CORO will likely hold more than a dozen single-country ETFs at a time and can hold futures. We think an active approach like CORO could be a smart, efficient way to access international markets.
Demand for Active ETFs
“We continue to see more financial advisors leveraging active ETFs as model building blocks to scale the delivery of consistent, repeatable outcomes for their clients,” said Rachel Aguirre, U.S. Head of iShares Products at BlackRock. “CORO adds another alpha-generating opportunity to our active ETF platform, helping investors benefit from active investment and risk management in the ease and efficiency of the ETF wrapper.”
In 2024, assets in the iShares US Equity Factor Rotation Active ETF (DYNF ) and the iShares Flexible Income Active ETF (BINC ) swelled to $13 billion and $6.5 billion in assets, respectively. VettaFi believes advisor demand for active will remain strong industrywide in 2025.
For more information, please visit VettaFi.com | ETF Trends.
