Active management is picking up steam and gaining market share from its passive counterparts, leading investors to wonder if there are certain situations in which they need to look to higher-cost active funds for outperformance.
Jenny Johnson, president and CEO of Franklin Templeton, sat down with Julie Hyman, anchor for Yahoo Finance, today at Exchange: An ETF Experience to discuss Franklin Templeton’s experience as both an active and passive ETF manager.
“[Active ETFs make up] 4% of assets but 12% of flows,” Johnson said. “So I think that people are starting to recognize we’ve had 12 years of just massive central bank intervention where money is essentially printed out there.”
“When interest rates were zero, where were you going to put your money?” Johnson asked the audience. “You put [it] in the equity markets.”
Johnson said that in the economic environment experienced over the last several years, all boats float up.
“We all know in momentum markets, passive tends to do better,” Johnson said. “Now in this environment of rising rates, inflation, supply chain and demand questions, potentially stagflation, that’s when we need active.”
Johnson said the current — and future — economic climate calls for active management, making it a real opportunity for active to shine.
Franklin Templeton, however, has an extensive line-up of both passive and active funds offered to investors.
“We want to either be the building blocks or the end solution, depending on the client’s needs,” Johnson said. “We just want to offer optionality for clients.”
Johnson pointed to emerging markets as an example, in which active management often outperforms its passive fund counterparts.
“But if you’re just trying to get quick exposure, especially to people who tend to be macro investing, just a passive quick-country ETF is a great solution for that,” Johnson said.
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