Active management has stepped up in a topsy-turvy last few months, thrown for a whirl by rising rates, sticky inflation, and the competing narratives of a soft landing versus an earnings and rate-induced recession. VettaFi sat down with Natixis Investment Managers’ head of institutional product and ETFs Nick Elward at the Exchange ETF conference in Miami last week to discuss active ETFs, including some of their strategies for a complicated 2023.
Speaking to advisors interested in active, the focus has been on the type of active management an ETF shop offers, whether it’s more traditional or concentrated, quantitative or semi-transparent. That active interest has grown as active mutual fund managers have not only entered the ETF game but also brought SMA strategies to the retail market, Elward said.
For Natixis, their approach is concentrated when it comes to equities, with the Natixis Vaughan Nelson Select ETF (VNSE ) as a key example. Actively managed, VNSE is semi-transparent and concentrated in 20 to 40 large and mid-cap firms with a relatively low value based on discounted cash flow models. Charging 80 basis points, it’s returned 6.8% YTD, outpacing its Factset Segment Average which returned 6.7% in that time.
To Elward, a concentrated approach appeals to those looking for an active slice that can swing for the fences and deliver strong returns by virtue of its concentration. For one of the year’s biggest themes, fixed income, Natixis has an offering that looks for yields while being mindful of a looming Fed.
“The strategies that I think are more interesting to financial advisors at this point, number one would be short duration, fixed income investing,” Elward said, pointing to uncertainty about the Fed’s rate hikes as a reason to avoid duration and lean towards shorter duration and an opportunity to consider the Natixis ETF Trust (LSST ).
LSST just hit its five-year ETF mark in December and is actively managed to provide current income with limited duration risk. Investing in investment-grade corporate, US government, mortgage-backed, and other securities from the U.S. and abroad, the ETF’s managers use both macro and sector analysis to find added short-term yield. LSST has outperformed its Factset Segment Average over the last three months, as well, returning 1.8% according to VettaFi.
In perhaps the firm’s strongest example of active management, the Natixis U.S. Equity Opportunities ETF (EQOP ) offers a multi-manager team approach, including active managers from related shops Harris Associates and Loomis Sayles, which serve as subadvisors. Charging 85 basis points, the active strategy has more than doubled the performance of its ETF Database Category Average and its Factset Segment Average YTD.
“It just keeps it simple for a financial advisor that simply wants to have a product that’s up against the S&P 500. You get Loomis on the growth side, Harris on the value side, bring them together and beat the S&P 500,” Elward said.
The active ETF landscape is changing all the time, and Natixis, which also offers SMAs, has a suite of products that reflect the ways active ETFs are developing. For those investors looking to add an active slice to their portfolios, it may be worth looking to a traditionally active shop like the Boston-based Natixis.
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