While market volatility is down about 30% for the year (per the CBOE Volatility Index, or VIX for short), recession fears could stir up more volatility. As such, institutional investors could look to active management to help quell fluctuations in the major stock market indexes.
Despite the ease-of-use and cost efficiency that a passive index can offer, more institutional investors could be relying on active strategies more often. At least that’s what a Cerulli Associates report is noting.
“Despite a steadily narrowing gap between the amount of money in active and passive strategies, Cerulli’s research shows active management has a growing attraction that might have something to do with the rockier outlook for the financial markets,” an Investment News article said of the Cerulli research.
It makes sense given the current macroeconomic landscape, fraught with uncertainty despite the major stock market indexes trending higher thus far this year. Recession fears continue to remain in the back of the mind of investors as the Fed tries to guide the economy to a soft landing.
Institutions Plan to Increase Active Allocations
In the meantime, it appears institutions are hedging their bets with active management strategies per the Cerulli report. Insurance companies, in particular, are looking to increase their exposure to active management strategies to 62% from 59%.
“Five out of six categories of institutional investors are on track to increase their portfolio allocations to active equity strategies over the next two years, and four of six are planning an increase to active strategies on the fixed-income side, the research shows,” the Investment News report said.
Corporate defined-benefit plans RE increasing to 49%. Finally, the health care category is increasing its exposure to to 52%. Still, retail investors aren’t left out in the cold. They can always look to get active exposure via exchange traded funds (ETFs).
T. Rowe Price offers a suite of actively managed ETFs. Among the funds are the T. Rowe Price Blue Chip Growth ETF (TCHP), the T. Rowe Price Dividend Growth ETF (TDVG), the T. Rowe Price Equity Income ETF (TEQI), the T. Rowe Price Growth Stock ETF (TGRW), and the T. Rowe Price US Equity Research ETF (TSPA).
For more news, information, and analysis, visit the Active ETF Channel.