New data from the month of March once again showed big inflows for active ETFs. Even as global economic conditions are teetering as the U.S.-Israel-Iran war continues, investors continued to drive assets into actively managed ETFs — so much so that they significantly outpaced passive ETF inflows despite AUM disparities between categories.
Key Takeaways
- Active ETFs continued strong momentum from February into March.
- International segments stood out for flows.
- Passive dominated domestic fixed income.
See more: Active ETFs Again Set AUM Record in February
According to data from Factset, actively-managed ETFs added $55.5 billion in overall net inflows for the month of March. That managed to outpace $51.1 billion coming into passive ETFs in that same period — a striking gap given the massive disparity in total AUM. Actively managed ETFs had $1.5 trillion in AUM across equity and fixed income categories as of the end of March per the data set, dwarfed by the $11.8 trillion in passive ETFs.
Active vs. Passive ETFs: Monthly Flows
Where did active draw its biggest source of advantage over passive for the month? Active international fixed income ETFs outstripped their passive peers massively. Those funds added $6.5 billion in net inflows, compared to $463 million in passive ETF inflows for the same category.
That may speak to investor fear surrounding global volatility. Passive fixed income ETFs can struggle to adapt to rapidly shifting situations, generally unable to change bond allocations due to a required adherence to their underlying index’s specific weights. Active funds by contrast can more closely scrutinize individual debt offerings, leaning in and out of subcategories as needed. With the U.S. dollar impacted by global financial uncertainty and energy cost volatility, that could prove crucial.
See more: This Active Bond ETF Just Hit a Key Milestone as Market Vol Rises
Intriguingly, however, while active international fixed income ETFs outpaced their passive peers, passive fixed income ETFs overall outpaced active fixed income ETFs in March inflows, $29.9 billion to $17.3 billion. It was in equities where actively managed ETFs sealed the day and really outpaced passive. Active equity ETFs added $34.7 billion in net inflows, compared to just $22.5 billion for passive. While international equities beat domestic in both segments, active international was the biggest gainer in equities, with $19 billion.
T. Rowe Price’s active ETF strategies were just some of the active funds that helped lift the space to success in March. For example, the firm’s T. Rowe Price International Equity ETF (TOUS ) has added about a quarter billion in net inflows over the last three months, per ETF Database. The fund uses the firm’s fundamental research capabilities to construct a portfolio of international equities. Looking ahead, with global uncertainty still a key factor, actively-managed ETFs could continue to dominate — with options like TOUS worth watching.
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