After growing acquainted with passive index-based exchange traded funds, many investors are now branching out into actively managed fixed-income and smart beta equity strategies.
“Active management has made a really big comeback when it comes to ETFs, especially within fixed-income. That’s where we’re seeing the strongest growth within actively managed ETFs,” Ryan Issakainen, SVP, Exchange-Traded Fund Strategist, First Trust, said at the Inside ETFs conference.
“When it comes to equities, we’ve had a lot of sort of a shift in popularity toward these factor-based ETFs, and I think that has a lot to do with the fact that investors are still looking for ways to outperform,” he added.
First Trust offers a suite of various ETF strategies that investors have picked up on. For example, the First Trust Low Duration Opportunities ETF (LMBS) is First Trust’s most popular actively managed ETF play. The ETF tries to generate current income and capital appreciation through investment grade, mortgage-related debt securities, and other mortgage-related instruments tied to residential and commercial mortgages.
Additionally, the First Trust Value Line Dividend Index ETF (FVD) is a popular smart beta or alternative index-based ETF where holdings are pulled from a universe of stocks that have rankings of 1 or 2 in the Value Line Safety Ranking System. From there, Value Line selects companies with a higher than average dividend yield, as compared to the indicated dividend yield of the Standard & Poor’s 500 Composite Stock Price Index.
Watch Ryan Issakainen Discuss Fixed-Income and Smart Beta Strategies:
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