Bright Spots Emerge for Active Management | ETF Trends

Active management has long endured criticism as passive management has captivated investors’ attention and assets. But, in a somewhat quiet fashion, active is experiencing a renaissance of sorts this year.

That could be beneficial to a plethora of exchange traded funds, including the Calvert Ultra-Short Investment Grade ETF (CVSB) and the Calvert US Select Equity ETF (NYSE Arca: CVSE). In fact, the fields of ESG and socially responsible investing could be prime grounds for fund issuers to highlight the benefits of active management.

Having debuted in January as part of a broader suite of ESG ETFs from Calvert, CVSB and CVSE could be at the right place at the time. Not only is active management proving resurgent in 2023, but many advisors and retail investors remain enthusiastic about ESG investments.

Data Bodes Well for Active Managers

As is often said in the world of investing, past performance isn’t a promise of future returns. Still, it’s hard to ignore the accomplishments of active managers this year.

As global stocks and bonds roared back to life in the first half of 2023, so did the fund managers that actively buy and sell them,” noted Morningstar analyst Ryan Jackson. “Over the 12 months through June 2023, 57% of actively managed funds survived and beat their average passive peer. Their highest success rate in years. Active strategies normally trail passive index rivals during market rallies, but strong security selection and some wobbly index returns set the stage for an unexpected active-fund renaissance.”

Of relevance to investors mulling CVSB – a fixed income ETF – and CVSE – a large-cap equity strategy – is the point that the success of active managers in 2023 is broad-based and not focused on a narrow number of market segments.

“The active-fund revival swept across a range of categories: 16 of the 20 Morningstar Categories surveyed either improved or maintained their success rate from one year prior,” added Jackson. “It’s surprising that a market rally provided the backdrop for improvement. Historically, there is an inverse relationship between the performance of active managers and the performance of their targeted market segment. But active funds fared well even in the hottest corners of the market.”

Specific to CVSB and CVSE, the active management resurgence is relevant because advisors and investors are demanding more credible ESG fixed income options (CVSB) and because actively managed large-cap blend and growth funds (CVSE) are performing admirably this year.

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