Is the tide turning for actively managed funds? Two heavyweights in the capital markets seem to think so as BlackRock and Vanguard are looking to take on the actively-managed exchange-traded fund (ETF) market with its own offerings for investors.
“BlackRock and Vanguard, the twin powerhouses of the passive investment industry, look set to grab the lion’s share of assets in the small, but faster growing world of actively managed ETFs,” a Financial Times article noted. “The finding is likely to disappoint active fund managers, which have been squeezed by the rapid growth of passive ETFs in recent years and might have viewed the rollout of active ETFs as a way for them to fight back and grab a share of the lucrative pie.”
“BlackRock and Vanguard, which control a combined $3.8tn of the $7tn global ETF market, are currently only the fifth and 13th-largest managers in the active space, which is led by First Trust, Pimco and JPMorgan Asset Management, according to ETFGI,” the article added. “However, a survey of 320 institutional investors with combined assets of $12.9tn, found BlackRock and Vanguard were the two houses they would prefer to manage their active ETF investments. The juggernauts were in particular tipped to deliver both the strongest performance and the best value for money.”
Current Active ETF Options
ETF investors looking for versatile, active strategies can start with funds like the Franklin Liberty Systematic Style Premia ETF (FLSP). The fund seeks to deliver absolute return (positive returns in rising or falling markets) by employing a multi-asset, long/short strategy
As mentioned, FLSP is actively risk-managed, seeking a target annualized volatility of 8 percent, and targets four style factors: quality, value, momentum and carry. For investors looking for fixed income options, they can check out the Franklin Liberty U.S. Core Bond ETF (NYSEArca: FLCB).
FLCB seeks to provide investors with diversified core fixed income exposure. FLCB is an active ETF that seeks total return through bottom-up fundamental bond selection and top-down sector.
“We believe active management is critical for achieving long-term returns and managing investment risk, particularly in multi-sector investment grade fixed income,” said Patrick O’Connor, global head of ETFs for Franklin Templeton. “We are thrilled to launch FLCB, which can serve as a core, building block allocation in an investor’s portfolio.”
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