A new research piece from BlackRock posits that active ETFs will hit $4 trillion in AUM by 2030. Firstly, the fact that $4 trillion is even on the cards for active ETFs speaks to how far the ETF variant has come. The onset of the ETF rule in 2019 helped ETFs proliferate, and active ETF strategies have benefitted. Already seeing $120 billion-plus inflows for the first half of the year, what should investors make of that $4 trillion AUM total?
See more: T. Rowe Price Adds First Active Tax-Free Bond ETF to Roster
BlackRock’s analysis points to model portfolios and the growing accessibility of ETF investing online as important catalysts for that growing AUM. Many mutual fund investors are also moving towards ETFs for their greater tax advantages and transparency, driving big movement in flows.
What $4 Trillion AUM for Active ETFs Means for Investors
Perhaps most important, however, is the diversity of options in the active ETF space. A growing variety of equity and fixed income strategies can appeal to a broader audience. BlackRock points to three distinct categories that may draw attention: alpha-seeking, outcomes-focused, and exposure-oriented ETFs.
“We’re seeing growing adoption of active ETFs by advisors and favorable sentiment toward these products from non-users,” said VettaFi head of research Todd Rosenbluth. “As education about the funds grows, we believe the asset bases will quickly follow.”
T. Rowe Price stands out as a firm in the space based on its suite of active ETFs. The firm leans on its fundamental research capabilities in strategies like the T. Rowe Price U.S. Equity Research ETF (TSPA). TSPA is designed to provide similar economic and risk characteristics as the S&P 500. But unlike the index, TSPA’s portfolio is driven by a team of specialized industry analysts who select the holdings based on in-depth fundamental analysis. The ETF is delivering by outperforming the benchmark more than 1.2% per year on average since its inception in 2021.
Active ETFs had a banner year last year and look set to continue rewarding investors. Flows are arriving as the space grows towards that $4 trillion in AUM. So keep an eye on active investing as one option to boost portfolios.
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