Actively managed ETFs have certainly enjoyed a profound increase in market momentum this year. Back in August, active ETFs passed the $1 trillion threshold in terms of worldwide assets. The good news didn’t stop there either, with many major money managers launching new takes on actively managed products throughout the year.
There’s more than one good reason for why investors are choosing to opt for actively managed fund products. Compared to many passive strategies, actively managed ETFs can offer distinct offensive and defensive benefits.
An active portfolio team can more nimbly adapt a portfolio to benefit from the latest market and macro trends. These perks work inversely as well, as active ETFs can pivot to a more defensive strategy during periods of downturn.
This flexibility helps active management shine through a wide variety of investing strategies. Active core ETFs can help traders who seek to outperform the core indexes. Meanwhile, niche or alternative fund strategies can certainly benefit from the de-risking that active management offers.
Momentum is likely to persist for actively managed ETFs in 2025, as well. Next year’s macro environment offers good growth potential, but active ETFs may be better positioned to navigate potential inflationary volatility.
PEPS Stands Apart From Other Large Cap Strategies
For example, take a closer look at the Parametric Equity Plus ETF (PEPS). PEPS combines a core equity strategy with a rules-based options strategy for additional outperformance.
Large cap equities remain the key focus for the fund’s underlying portfolio. This PEPS portfolio is then amplified with an options strategy that can deliver additional returns. This dual-purpose portfolio offers two vehicles to deliver results from large cap equities.
As an added perk for the fund, PEPS can offer higher potential for overall tax efficiency. The fund employs an active tax management strategy that includes loss harvesting. This tax-efficient strategy can help the fund outperform traditional passive large-cap strategies.
PEPS serves as a terrific example for how an active strategy can offer a well-rounded suite of benefits. With multiple avenues to deliver tax-efficient returns, PEPS can help investors make the most out of their large cap equity portfolio.
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