Investors are turning toward active ETFs and away from mutual funds thanks to the ETF wrapper, per data from Trackinsight’s Global ETF Survey. The survey, which came out this week, showed growing investor favor toward active strategies. That speaks not only to active’s big year in 2023, but to its potential for continued growth in 2024 and beyond.
According to the survey, more than 80% of investors would choose an active strategy in an ETF format compared to a mutual fund. What’s more, nearly two out of three responses came from outside the United States via respondents from family offices to financial advisors.
Why might investors be looking to active ETFs compared to mutual funds? For one thing, ETFs are much more transparent and tax efficient. That can be a source of particular comfort for an active strategy given how frequently they can adapt.
Active ETFs to Take Assets From Mutual Funds?
For example, ETFs are securities themselves, listed on stock markets. They report their holdings on a daily basis, much more frequently than mutual funds that provide much more infrequent holdings updates. As for cost, mutual funds create tax events much more frequently for shareholders, which ETFs limit thanks to their creation/redemption share mechanism.
Compared to active mutual funds, active ETFs offer some significant advantages. Mutual funds still retain significant assets in the global fund landscape, which means that there are still many investors who may want to convert assets from mutual funds to active ETFs.
Outside of just the wrapper, there are significant advantages to active ETFs. Active ETFs can outperform less flexible passive ETFs. At the same time, they can adapt to volatility caused both by events and big market fluctuations. T. Rowe Price, for example, offers active strategies like the T. Rowe Price U.S. Equity Research ETF (TSPA ).
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