2023 has been a strong year for active ETFs. So strong, in fact, that active fund launches are helping push overall ETF launches to new heights. Indeed, based on new projections, total ETF launches in 2023 look set to surpass the record 475 launches in 2021. As of the end of October, about 391 new ETFs had launched this year compared to just 311 at the same time in 2021.
Active strategies, already doing well this year, are playing a key role in that record-breaking pace. Active strategies have already picked up significant flows relative to their AUM. Despite holding just about 6% of total assets, actively managed ETFs still added almost one-third of total flows in September. Taken together, nearly 75% of the total 375 launches so far this year have been active ETF launches.
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Why, then, are asset managers launching so many active ETFs and why are they gaining assets? While 2023 hasn’t been a terrible year for markets, the narrative has swung rapidly between looming risks. Whether it’s the earnings recession markets feared to start the year, the mini banking crisis in the spring, or the ongoing rising-rate battle against inflation, risk has dominated the headlines. That volatility and the fear of a recession have set the table for active strategies to appeal.
At the same time, active ETF launches may be such a driving factor because of the potential oversaturation of passive ETFs. Active ETFs can offer investors the opportunity to invest in a greater diversity of strategies. Not only does the active ETF space offer strategies that look to mitigate or ride volatility, active strategies also include thematics, total return funds, and other offerings.
Taken together, it’s clear that active strategies have had a breakout year. With more launches coming and existing such ETFs picking up steam, consider how active ETFs can play a role in portfolios.
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