Active management is on the mend, and the exchange traded fund wrapper is a big reason why. Expect that theme to continue into 2021.
Advisors are looking critically at traditional market indexes and the challenges of navigating today’s new market environment.
“What many considered to be a left-for-dead segment of professional investing has seen a revival amid 2020′s unprecedented market volatility, paving the way for what could be a trillion-dollar chunk of the exchange-traded fund industry,” reports Lizzy Gurdus for CNBC.
Why Active Management?
There are times when advisors shouldn’t prioritize fees alone. Many asset classes embrace active management due to their superior results.
Some market observers believe that investors need to go beyond relying on past performance or buying the cheapest ETF. They are now incorporating a forensic approach to dig deeper into company fundamentals and their associated opportunities.
“More tradable than mutual funds, and with lower costs, higher tax efficiency and the potential for global distribution, ETFs are starting to encroach on that long-standing structure in earnest,” according to CNBC.
In various forms and methodologies, actively managed funds are increasingly prominent parts of the ETF landscape. That growth trajectory could last for years.
As the active versus passive management debate persists, the former is facing two principal hurdles—beating the market and remaining un-confidential.
Yet advisors are showing a willingness to embrace the new fund structure, indicating that active management is evolving, and that appetite for non-passive strategies remains strong.
“I would expect in the next six months we’ll see double, maybe triple the number of semi-transparent ETFs come into play,” said New York Stock Exchange official Doug Yones in an interview with CNBC. “It’s the largest active managers in the world. They want an ability to tap into this growth market. They’re seeing ETFs grow dramatically and it’s a better way to shield their alpha.”
For more on active strategies, visit our Active ETFs 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.