Despite numerous challenges, 2022 was a strong year for active ETFs. The actively managed ETF industry grew across nearly all asset classes throughout 2022, with assets under management reaching $340 billion at the end of the year, according to the New York Stock Exchange.
Full-year cash flow exceeded $80 billion, ending the year at $85.5 billion. Flows into active ETFs continued to surpass the broader ETF market share, representing roughly 14% of total industry inflows.
In terms of inflows, active equity funds led the way with $70.9 billion. Investors preferred domestic equity exposure (+$47.6 billion) to global (+$23.3 billion) and favored value to growth. ETFs focused on yield through a dividend tilt and/or an options overlay led the industry.
Even with global bond funds facing outflows, fixed income rallied from mid-year lows to reach $8.4 billion in inflows for the year. The flows favored ultra-short-term and short-term ETFs as well as municipals.
And in spite of — or perhaps because of — volatile markets, more than 77% of issuers experienced positive cash flows for the year, with more than a third experiencing cash flows in excess of $50 million. At the product level, more than 67% of active ETFs saw positive flows for the year and 233 experienced inflows exceeding $50 million.
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs can offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“With an active ETF, advisors benefit from deep research efforts used to select securities positioned by management to outperform,” said Todd Rosenbluth, head of research at VettaFi. “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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