Active management in ETFs are gaining market share in 2023, as leading managers bring their best ideas into the ETF industry.
As of July 31, 169 active ETFs had launched in 2023, comprising nearly 70% of total ETF launches. (In comparison, active ETF launches made up nearly 63% of all ETF launches last year.), according to VettaFI
Steve Cook, head of ETFs at Harbor Capital, explained the appeal of active management at a panel on VettaFi’s Equity Symposium on September 21.
“This year, more so than the past, you’re seeing uncertainty,” he said. This means that “having strong active bottom-up analysis in that environment … is really important. That’s why folks are gravitating towards active management in 2023.”
See more: “Why Today’s Equity Symposium Is Can’t Miss”
How Active Management Seeks to Identify the Winners & Avoid the Losers
Fellow panelist Marissa Ansell, senior client portfolio manager at Goldman Sachs, agreed: “Active management is all about trying to identify the winners and avoid the losers.”
She mapped out the ways in which actively managed funds can achieve this.
“First off, with an actively managed portfolio, you can choose what to invest in,” she said. “Second, valuation really matters. It’s not just what you own, it’s how much you paid for them. Third, there is real time management of active portfolios.”
Ansell also notes how a huge limitation with passive funds is the rebalancing that only occurs monthly, quarterly, or even twice a year. Much can change with a security’s fundamentals during that time. So, active managers can be nimble and change their positions as company dynamics and market conditions change.
During the panel, VettaFi surveyed attendees to see how much of their average client portfolio is made up of actively managed ETFs and/or mutual funds. Per the poll results, 21% of respondents said they allocated 30-50% of their client portfolios to active funds.
Another 23% of the respondents state there is active management for more than 50% of their average client portfolio.
“Folks trust the idea that they can find a good manager with great discipline and a great strategy behind it,” said Cook.
Read more: “OSEA Manager On Active Advantages“
Disciplined, Active ETFs to Consider
Cook cited the Harbor International Compounders ETF (OSEA) as a “really disciplined,” active high-conviction international growth ETF Harbor offers. The fund provides exposure to 30 companies believed to be able to sustain their growth levels well into the future.
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Important Information
Investors should carefully consider the investment objectives, risks, charges and expenses of a Harbor fund before investing. To obtain a summary prospectus or prospectus for this and other information, visit harborcapital.com or call 800-422-1050. Read it carefully before investing.
All investments involve risk including the possible loss of principal. Please refer to the Fund’s prospectus for additional risks associated with the Fund. For the Fund’s prospectus, holdings, and most current standardized performance, please click: OSEA
OSEA Risks: There is no guarantee that the investment objective of the Fund will be achieved. Stock markets are volatile and equity values can decline significantly in response to adverse issuer, political, regulatory, market and economic conditions. Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. A non-diversified Fund may invest a greater percentage of its assets in securities of a single issuer, and/or invest in a relatively small number of issuers, it is more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio.
Additional Information
This information should not be considered as a recommendation to purchase or sell a particular security.
Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value. The ETF is new and has limited operating history to judge.
The views expressed herein are those of the investment professionals at the time the comments were made. They may not be reflective of their current opinions, are subject to change without prior notice, and should not be considered investment advice.
C Worldwide is a third-party subadvisor to the Harbor International Compounders ETF
This article was prepared as Harbor Funds paid sponsorship with VettaFI.
Foreside Fund Services, LLC is the Distributor of the Harbor ETFs.
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