Actively Managed Strategies Could Pick Up Steam in the ETF Universe

The exchange traded fund universe has quickly expanded on the increased popularity of passive, index-base strategies. The next growth spurt could come from the actively managed ETF side as more prominent mutual fund names begin to step into the space.

“We’re going to have a whole host of actively managed ETFs coming to market. There’s semantics as to whether they’re transparent enough or not – that doesn’t matter. You’ve got firms like T. Rowe Price, like Fidelity, like American Century that have strong, active management franchises, and there are going to be ETF versions of those by the next time we’re here in 2021,” Todd Rosenbluth, Head of ETF & Mutual Fund Research, CFRA Research, said at the Inside ETFs conference.

As the industry develops a non-transparent structure to attract active managers into the more efficient ETF investment vehicle, CFRA Research will continue to provide an in-depth analysis of new funds ahead.

In a recent research note, Rosenbluth argued that investors need to go beyond relying on past performance or buying the cheapest ETF. They are now incorporating a more forensic approach that could dig deeper into company fundamentals.

At CFRA Research, the researchers have highlighted holdings-based metrics beyond qualitative stock recommendations, including a forensic accounting review of the portfolio’s earnings quality; reward funds for the level of consistency of their relative returns, in up and down markets; incorporate the total cost of ETF ownership; and utilize a proprietary ETF-focused classification system sourced from the First Bridge ETF database, which CFRA acquired in August 2019.

CFRA Research offers recommendations and research tools to help advisors and investors considering newer and more narrowly constructed funds. The research provider will also continue to assess ETFs separately from mutual funds and rate funds less than three-years-old.

Watch Todd Rosenbluth Discuss Acitvely Managed Strategies:

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