Not only are investors continuing to migrate from mutual funds to exchange-traded funds, but they’re also moving towards actively managed ETFs. Data from ETF and ETP research and consulting firm ETFGI show that investors pumped more than $8.2 billion into globally listed active ETFs in July.
This marked the 28th consecutive month of active ETFs enjoying net inflows. Active ETFs, listed globally, have had net inflows of $71.41 billion year-to-date. This is the second-highest year on record compared to last year’s $88.97 billion. Globally listed active ETFs now have $474 billion in assets under management.
With index funds unable to provide strong returns or protect against downside risk, active ETFs are “picking up steam investors,” with more holding active ETFs in their portfolios now than two years ago, according to Trackinsight’s Global ETF Survey 2022. Per Pensions & Investments, 37% of survey respondents plan to increase the share of active ETFs in their portfolios by at least 5% this year, up from 25% who said the same in 2020.
One advantage that active managers have over index funds is that they can not only select areas where they can have an edge, but they can also avoid places with the most volatility. At Exchange: An ETF Experience 2022, JPMorgan Asset Management’s global head of ETF solutions, Byron Lake, told VettaFi editor-in-chief Lara Crigger for “ETF Leaders, Powered by the New York Stock Exchange” that active management “can adapt when the market in real time, while an index fund cannot.
“Because of active management, the investors can change when the market environment changes,” said Lake. “So, if it’s a fixed income strategy and we’re worried about duration, maybe they can pull their duration in. If they’re seeing the market on the equity side rotate from one sector to the next, maybe they adapt the portfolio to do that as well.”
Active managers have also been proving their worth recent months. In April, 54% of the large-cap active funds outperformed their benchmark, the Russell 1000. In May, 56% beat the index — and by an average of 11 basis points.
For investors looking to add active management to their portfolios, T. Rowe Price offers a suite of actively managed equity ETFs, including the T. Rowe Price Blue Chip Growth ETF (TCHP ), the T. Rowe Price Dividend Growth ETF (TDVG ), the T. Rowe Price Equity Income ETF (TEQI ), the T. Rowe Price Growth Stock ETF (TGRW ), and the T. Rowe Price U.S. Equity Research ETF (TSPA ). T. Rowe Price has been in the investing business for over 80 years through conducting field research firsthand with companies, utilizing risk management, and employing a bevy of experienced portfolio managers carrying an average of 22 years of experience.
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