Active Management Can Provide Value in Volatile Markets

“It’s no question, it’s a difficult time. And I would say the good news is, in times of great volatility, active management pays off,” said Johnson. “So, it’s times like these that you find value.”

The Franklin Templeton CEO added that while “flows are down across the board,” she’s “seen active outperforming more.”

This echoes what Johnson said at Exchange: An ETF Experience month, telling Yahoo Finance anchor Julie Hyman that “in this environment of rising rates, inflation, supply chain and demand questions, potentially stagflation, that’s when we need active.” Johnson added in the interview at Exchange that the current — and future — economic climate calls for active management, making it a real opportunity for active funds to earn their fees.

Active U.S. stock funds have indeed fared better thus far in 2022 than they have in years past. Morningstar’s chief ratings officer Jeffrey Ptak recently wrote that roughly “60% of such funds posted higher returns than their style-specific benchmark YTD through 4/30/22,” adding that this is because they “did well during the two drawdown periods” from January 1 through March 14, and from March 30 through April 30.

Amidst the multiple headwinds the sector faced, investors continued to put money into active ETFs at a near-record pace in Q1. Assets managed in active ETFs reached $306.1 billion as of March 31, up $103 billion year-over-year, according to FactSet.

“Active managers’ ability to sell shares of out-of-favor companies and refocus the portfolio during market volatility is a key reason investors are willing to pay higher fees,” said ETF Trends’ head of research, Todd Rosenbluth. “The start of 2022 has been an ideal time for active managers to shine.”

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