For the first time, new actively managed exchange traded fund launches are outpacing those of new index-based offerings as more money managers eye the ETF space.
In what appears to be a first in at least two decades, the debuts of new active ETFs have outstripped new passive index-based ETFs, with 68 active ETFs launching in 2020, compared to 63 passive ones, Bloomberg reports.
Franklin Templeton was the latest fund provider to add onto its ETF suite after launching an active fixed-income fund, the Franklin Liberty Ultra Short Bond ETF (FLUD), which could help provide investors with diversification in the ultra-short debt investment category.
Additionally, American Century Investments launched two active ESG ETFs on Wednesday utilizing the New York Stock Exchange (NYSE) AMSSM (Actively Managed SolutionSM) to provide additional choices for investors seeking actively-managed Environmental, Social and Governance (ESG) strategies in a lower-cost ETF vehicle, including the American Century Sustainable Equity ETF (ESGA) and the American Century Mid Cap Growth Impact ETF (MID).
After the coronavirus pandemic triggered a spike in volatility and dragged on corporate earnings, some investors are considering active management to better weave in and out of these more uncertain markets. According to Bloomberg data, active ETFs have attracted more than $5.3 billion in both May and June and another $2.5 billion so far in July.
However, active ETFs only have a total $122 billion in assets under management, or only a sliver of the overall $4.5 trillion U.S.-listed ETF marketplace.
“The ETF industry is so saturated that investors are ready for different content than just passive products,” Linda Zhang, chief executive officer of Purview Investments, told BLoomberg. “They are looking for active content that provides hopefully long-term, much more attractive performance.”
Further adding to interest for actively managed ETFs, innovative ETF structures that offer a semi-transparent portfolio methodology have also attracted greater interest among stock-picking money managers whom are more wary of potential frontrunners if they were to offer a traditional fully transparent ETF.
“Performance is going to be a big driver,” said DelSignore, principal at Lakefront Advisory, told Bloomberg. “Investors look to active management for the ability to outperform, so if these products deliver, I think they should see inflows.”
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