It’s been a huge year for the ETF industry with the launch of a record number of new funds, record asset flows, and some of the biggest firms converting their mutual fund strategies to ETFs for the first time. The year saw a lot of outperformance for indexes in the first half, but as volatility increased, the appeal of active management continued to grow with the launch of increasingly more active ETFs and more flows being routed into actively managed funds, reports Barron’s.
This year, ETFs raked in over $900 billion in new money, trouncing last year’s record of $500 billion by the end of the summer. A record-setting 450 new ETFs were also launched this year, and it was the second year in a row that more ETFs were launched than mutual funds. The ETF industry currently has about $7 trillion in assets under management, compared to the $20 trillion in mutual funds; at this growth rate, ETFs are bound to overtake the mutual fund market, particularly as more mutual funds convert to the tax-efficient ETF wrapper.
The one thing that ETFs are more consistently aligning with mutual funds on is the preference for active management by advisors and investors. Of all of the 450 new ETFs launched this year, almost two-thirds of them were actively managed funds.
Advisors and investors are turning to actively managed funds as market volatility and uncertainty continue to loom as major concerns. Between the introduction of the threat of Omicron and regulatory changes from the central bank, markets have been on a ride during the latter half of 2021. Volatility is the kind of environment that stock pickers and active management are anticipated to shine in, with active fund managers constantly monitoring and responding to changing market conditions as they happen.
T. Rowe Price is one of the major active management firms, and it has launched four new ETFs over the course of the year. The T. Rowe Price U.S. Equity Research ETF (TSPA ) launched in June, followed by the T. Rowe Price Total Return ETF (TOTR ), the T. Rowe Price QM U.S. Bond ETF (TAGG ), and the T. Rowe Price Ultra Short-Term Bond ETF (TBUX ), which all launched in September.
The firm brings a bevy of experience and research to its products, with portfolio managers averaging over 20 years in investing each, as well as over 400 investment professionals dedicated to researching companies within ETFs.
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