Investors are becoming more comfortable investing in actively managed ETFs. Data from FactSet show that of the $7.12 trillion in assets under management within exchange-traded funds, 4% are in actively managed ETFs as of March 31. Meanwhile, of the $196.6 billion in net inflows that went into ETFs in the first quarter, 11% went to active funds.
This is after non-transparent ETFs have only been on the market for barely two years. After the U.S. Securities and Exchange Commission put new rules in place in 2019 making it easier for actively managed ETFs to hit the market, American Century Investments launched the first non-transparent ETFs in late March 2020: the American Century Focused Dynamic Growth ETF (FDG) and the American Century Focused Large Cap Value ETF (FLV).
“Advisors have increasingly gained comfort with the expertise active managers can provide with the liquidity and tax efficiency benefits provided by ETFs,” said ETF Trends’ head of research Todd Rosenbluth. “There remains tremendous room for growth in the years to come.”
Institutional Investor recently reported that the average gross excess return for active managers investing in global large-cap companies from 2012 to 2021 was 1.3%. For those investing in non-U.S. large-cap and emerging markets, the excess returns were 2.2% and 1.9%, respectively. And concerns over inflation, rate hikes, and Russia’s invasion of Ukraine have made investors wary of U.S. large-cap stocks, giving active managers a chance to prove their worth.
Boston-based financial advisor Raj Sharma recently told Barron’s that he believes “this is the golden age of active management,” adding: “Passive management worked when you had a rising tide lifting all boats. Now, you have an environment where you have winners and losers.”
T. Rowe Price offers a suite of actively managed ETFs. T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.
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