As active ETFs continue to mature, more and more firms are entering the space with renewed vigor. Active strategies offer real advantages as a “plus” option on top of a core, passive allocation, while also providing a landing spot for many investors’ active mutual fund assets. Federated Hermes is the latest firm to make a serious move, with four active quantitative ETFs launching today.
See more: Federated Hermes Looks to Set Itself Apart in Quant Investing
The quartet of active quantitative ETFs doubles the firm’s total number of ETFs. The strategies include the Federated Hermes MDT Large Cap Core ETF (FLCC), the Federated Hermes MDT Large Cap Growth ETF (FLCG), the Federated Hermes MDT Large Cap Value ETF (FLCV), and the Federated Hermes MDT Small Cap Core ETF (FSCC).
FLCC, as an example, invests primarily in large-cap firms. The strategy looks to lean on the firm’s proprietary quantitative model per its prospectus.
The suite leans into the issuer’s quantitative capabilities, with its suite of MDT strategies emphasizing a multidisciplinary approach. Its stock-selection process leans on Federated Hermes’ research capabilities as well as data from its quantitative approach. The strategies will include a leadership team averaging about two decades of asset management experience.
“Great to see Federated expand their active ETF lineup with more equity offerings spanning value and growth,” noted Kirsten Chang, VettaFi senior industry analyst. “Time will tell whether the great rotation we’re seeing is here to stay, but so far, there’s ample opportunity in value and small-caps, which still look cheap on a relative basis.”
Active Quantitative ETFs
Federated Hermes Senior Vice President and Director of ETF Business Brandon Clark shared his thoughts on the firm’s new strategies. He explained that the firm aims to be very deliberate with its approach to launching ETFs.
“We could launch 20 products and have to nurture and incubate 20 products at once, or we can be selective about how we go about this,” Clark said. “I want to be really thoughtful about making sure we get things started so that nothing gets left behind as we launch products.”
ETF education will remain a priority, he added. Many investors have moved from active mutual funds to active ETFs, but 95% of active assets are still in mutual funds compared to just 5% in active ETFs.
“For me, [regarding] active management in the ETF wrapper, there are some great synergies that get created there,” he added.
Currently, the firm’s largest strategy, the Federated Hermes Strategic Dividend ETF (FDV ) sits at $112 million in AUM. For investors looking at adding active equity strategies, the new quartet of active quantitative ETFs may appeal.
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