Active ETFs Continue Market-Share Grab | ETF Trends

In yet another indicator of active ETFs’ dominant 2023, active strategies have laid down another flows-based marker. Active strategies have not only picked up significant flows despite their relatively small AUM. Evidence is building that active funds are also eating at so-called midmarket ETFs that neither actively invest nor charge low fees.

Indeed, according to recent data, that middle class of ETFs lost about $4 billion in AUM last month. At the same time, lower-cost funds and active ETFs added a significant $39 billion, in turn. That comes as active strategies have added 28% of all U.S. flows, a major uptick from past years and a sign of active’s ascendancy.

See more: “Eye Active ETFs to Ride Potential Rate Cuts

What might explain that pickup in interest for actives? Active strategies offer the ability to handle volatility, reacting much more quickly than their passive counterparts. That helps earn their higher fees, especially compared to those midmarket, passive funds. 2023 has certainly seen its fair share of volatility due to the rising rate and inflation debacle. At the same time, other smaller events like the mini bank crisis and geopolitical issues may have driven interest in adaptable active funds.

Not only do they address volatility issues, but actives also bring seasoned management to bear for their investors. In a market facing concentration risk via the so-called Magnificent Seven but otherwise pretty steady growth, seasoned managers who know their own sectors for investors who want to diversify there can help.

Indeed, not only are active strategies agile and bring seasoned management, they can also outperform staid passives. Ahead of a new year, spicing up a portfolio with an active suite can really kick-start a portfolio. With active ETFs continuing to put up big numbers, they may appeal to curious investors looking to refresh their holdings.

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