Actively managed exchange traded funds may be having their moment.
Active ETFs “gathered net inflows of US$16.90 billion during February, bringing year-to-date net inflows to a record US$33.80 billion. Assets invested in actively managed ETFs and ETPs finished the month up to 4.9%, going from US$303 billion at the end of January to a record US$318 billion,” according to ETFGI.
Active managers have taken some lumps in recent years, but many market observers believe that active opportunities will shine anew in 2021.
Mutual Fund Conversions and a Competitive Landscape
Further stoking inflows to active ETFs are mutual fund issuers entering the ETF space, some of which are converting established actively managed mutual funds to the better-serving ETF structure. There other factors that could bode well for active managers this year.
“Despite a sell-off in the last week of the month, the S&P 500 gained of (sic) 2.76% in February, driven by optimism on COVID-19 vaccines, as well as continued monetary and fiscal stimulus. Developed markets ex- the U.S. ended the month up 2.50% while Emerging markets were up by 1.50% for the month. The leaders of the developed market in February were Hong Kong (6.03%), Canada (5.66%) and Spain (5.32%).“ according to Deborah Fuhr, managing partner, founder, and owner of ETFGI.
One of the most elusive combinations in investing is robust upside capture coupled with adequate downside protection.
Investors have had to adapt to this new lower-for-longer rate environment by turning to cash, structured products, and gold as safe-haven plays. On the other hand, investors have also become more aggressive, raised stock allocations, chased momentum technology winners, turned to speculative-grade bonds, and bought speculative bets like crypto in search of higher returns.
“Equity focused Active ETFs/ETPs listed globally attracted net inflows of $10.47 Bn during February, bringing YTD net inflows to $20.16 Bn, which is much greater than the $2.84 Bn in net inflows gathered YTD in 2020. Fixed Income focused Active ETFs/ETPs listed globally gathered net inflows of $5.25 Bn in February, bringing YTD net inflows to $11.46 Bn, more than the $9.03 Bn in YTD net inflows attracted in 2020,” adds ETFGI.
For more on active strategies, visit our Active ETF Channel.
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.