Active ETFs Are Flexing Their Muscles | ETF Trends

Actively managed exchange traded funds remain a small part of the overall ETF universe, but that’s gradually changing as active funds are cobbling together momentum this year.

On the back of July inflows of $6 billion, active ETFs listed around the world had a combined $404 billion in assets under management as of July 31, according to ETFGI. Year-to-date, active ETFs hauled in $88.23 billion in new assets, good for the growth of nearly 42%, says the London-based research firm.

This year’s ascent by active ETFs is buoyed by a variety of factors, including strong equity markets, low yields on a variety of fixed income instruments, and ongoing conversions of active mutual funds to the ETF structure as well as more active mutual fund shops bringing ETFs to market.

“Equity focused active ETFs/ETPs listed globally gathered net inflows of $2.64 Bn during July, bringing YTD net inflows to $40.24 Bn, more than the $12.41 Bn in net inflows equity products attracted for the year to July 2020,” according to ETFGI. “Fixed Income focused active ETFs/ETPs listed globally attracted net inflows of $2.40 Bn during July, bringing YTD net inflows to $37.62 Bn, much greater than the $20.32 Bn in net inflows fixed income products had attracted through July 2020.”

Of the top 20 active ETFs in terms of assets added this year, seven are dedicated bonds, a group including the SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN), and the Vanguard Ultra-Short Bond ETF (VUSB). With emerging markets debt being the exception, active bond managers broadly beat benchmarks in the first half of 2021.

More issuers are getting into the active fixed income ETF space. For example, T. Rowe Price in June filed plans for three bond ETFs: The T. Rowe Price Total Return ETF, T. Rowe Price QM U.S. Bond ETF, and T. Rowe Price Ultra-Short Term Bond ETF.

Of course, with the major U.S. equity benchmarks residing near record highs, stocks remain a story, and that’s providing an opportunity for active managers to add value.

Some of the names on the rise among active equity-based ETFs include the T. Rowe Price US Equity Research ETF (TSPA), T. Rowe Price Blue Chip Growth ETF (TCHP), T. Rowe Price Dividend Growth ETF (TDVG), T. Rowe Price Growth Stock ETF (TGRW), and T. Rowe Price Equity Income ETF (TEQI).

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.