We first saw these types of products mostly restricted to the fixed income asset class, but we are now seeing providers launch equity strategies.
Possible Benefits Compared to Passive ETFs:
- Potential for Outperformance: Unlike passive ETFs, actively managed funds have the potential to beat market returns by leveraging expert investment decisions.
- Flexibility: Active managers can swiftly adjust holdings in response to market changes and opportunities, a feature lacking in passive ETFs.
- Transparency: Active ETFs still maintain transparency with daily disclosures, providing investors with visibility into the fund's holdings and strategy.
Many popular providers such as Capital Group, Fidelity, and Vanguard have come out with actively managed ETFs. The introductions of these products creates a conflict between wanting to have the newest offerings on the product shelf and the risks associated with offering an unproven product. Despite how a strategy may be in theory, the practical aspects of liquidity such as bid ask spreads and volume are critical to having a successful experience when implementing new products. If your firm is looking into adding Active ETFs, talk to DDW and we can help you add the right products for your objectives.
