Active management’s market share within the exchange-traded fund sector is growing at a rapid pace. In a year of uncertainty driven by high inflation and market volatility, assets for active ETFs grew by $121 billion this year to reach $341 billion in 2022 (including mutual fund conversions). This is even though total ETF assets dropped by $290 billion.
All told, while only making up 4% of total assets in the space, active ETFs captured 14% of total net ETF flows this year, their highest take to date. And as Bloomberg’s senior ETF analyst Eric Balchunas noted, this doesn’t even include conversion assets.
Actively managed ETFs brought in over $73 billion of investor capital, representing an organic growth rate of 25% for active ETFs, according to Morningstar. This means that this segment grew more than three times faster than ETFs overall.
“The growing adoption of actively managed ETFs should come as no surprise for market observers. Major active mutual fund providers have entered the ETF fray by converting or cloning existing mutual fund strategies or adding new strategies,” wrote Bryan Armour, director of passive strategies research for North America at Morningstar Research Services. “The improved tax efficiency of ETFs was a quick win for investors in these strategies. Accepting more holdings transparency was a major concession for active managers, but ultimately another win for investors.”
Todd Rosenbluth, head of research at VettaFi, said: “With an active ETF, advisors benefit from deep research efforts used to select securities positioned by management to outperform. While this was commonplace for decades using mutual funds, it is only in the last few years that asset managers made available some of their best strategies for advisors to use with the liquidity and tax efficiency benefits unique to ETFs.”
T. Rowe Price offers a suite of actively managed ETFs and has been in the investing business for over 80 years, conducting field research firsthand with companies, utilizing risk management, and employing a team of experienced portfolio managers carrying an average of 22 years of experience.
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