cnbc.com
Actively Managed ETFs Surge, Driven by SEC Rule Change and Innovative Strategies
Actively managed ETFs are experiencing a surge in popularity, fueled by a 2019 SEC rule change and the success of differentiated strategies, resulting in significant inflows and new launches in 2024, with further growth expected in 2025.
- What are the key areas of future growth potential for active ETFs, and what challenges or risks might they face in maintaining their success?
- Future growth in active ETFs is projected to continue, with an estimated $3 billion in mutual fund conversions anticipated in 2025. Untapped potential exists in fixed income and AI-related investments, where active management's complexity and adaptability offer advantages over passive strategies. This trend challenges the traditional dominance of passive funds and reshapes the asset management landscape.
- What factors are driving the rapid growth of actively managed ETFs, and what are the immediate consequences for the asset management industry?
- Actively managed exchange-traded funds (ETFs) are experiencing significant growth, attracting 27% of net inflows and 77% of new launches in 2024. This surge is partly due to a 2019 SEC rule change, enabling the conversion of 121 active mutual funds into active ETFs, resulting in an average inflow increase of $500 million per fund after conversion.
- How are successful active ETFs differentiating themselves from traditional stock-picking strategies, and what role do regulatory changes play in this shift?
- The shift towards active ETFs is driven by asset managers seeking to boost revenue and protect margins in a market dominated by low-cost passive funds. Successful active ETFs often offer differentiated strategies like options trading for income generation (JEPI, JEPQ) or quantitative factor rotation (DYNF), attracting investors seeking specialized exposure or certainty.
Cognitive Concepts
Framing Bias
The article frames the shift towards active ETFs positively, highlighting the benefits for asset managers and the success of certain active ETF strategies. The headline and introduction emphasize the growth and potential of active ETFs, potentially leading readers to perceive this trend as inherently positive without sufficient critical analysis of potential drawbacks or risks.
Language Bias
The article uses generally neutral language. However, phrases like "game changer" and descriptions of successful ETFs as having "found success" and "brought in" significant inflows subtly convey a positive bias towards active management. More objective language could improve neutrality.
Bias by Omission
The article focuses heavily on the growth of actively managed ETFs and the perspectives of asset managers, potentially omitting the viewpoints of passive ETF investors or financial advisors who may have differing opinions on this trend. The article also doesn't delve into the potential risks associated with actively managed ETFs, such as higher expense ratios and the possibility of underperforming passive alternatives. While acknowledging the limitations of space, a broader range of perspectives would enrich the analysis.
False Dichotomy
The article presents a somewhat simplistic view of the active vs. passive ETF debate. While acknowledging the dominance of passive ETFs, it strongly emphasizes the recent surge in active ETFs without fully exploring the nuances and complexities involved. It doesn't adequately address situations where passive investing may still be the more suitable approach.
Gender Bias
The article features numerous male executives and experts. While not explicitly biased, a more balanced representation of genders among quoted sources would enhance the article's inclusivity.
Sustainable Development Goals
The article discusses the growth of actively managed ETFs, which is creating new revenue streams and protecting margins for asset managers. This contributes positively to decent work and economic growth by supporting the financial industry and potentially creating new jobs.