Actively managed ETFs, like those offered by Avantis, continue to gain ground with investors, having brought in $67 billion in assets year-to-date. While active ETFs account for 5% of assets, they make up over 13% of flows YTD.
Last month, Morningstar’s head of client solutions Ben Johnson tweeted: “Active ETF launches have represented the majority of new ETF launches over past three years,” before writing in a follow-up tweet: “More investors, advisors, and asset managers have accepted ETFs as a better way to consume/invest in/distribute investment strategies of all stripes — active, passive, and all things in-between.”
While passive strategies lack the flexibility to adapt to changing market environments, active ETFs offer the potential to outperform benchmarks and indexes. Plus, active managers with greater resources and greater scope benefit from economies of scale, which can often translate to better returns.
“We’re seeing more growth within active ETFs, so I think there’s something to be said about investors looking for active in challenging markets and seeking professional assistance at the helm,” said Sandra Testani, vice president of ETF product and strategy for American Century Investments. “It’s a chance to be opportunistic and defensive when needed. That flexibility is being valued at this point in time.”
For investors wanting this “professional assistance at the helm,” Avantis Investors, a subsidiary of American Century, has several actively managed ETFs in its fund suite, including the Avantis U.S. Large Cap Value ETF (AVLV), the Avantis U.S. Small Cap Value ETF (AVUV), and the Avantis U.S. Equity ETF (AVUS).
AVLV invests in a broad set of U.S. large-cap companies, while AVUV invests primarily in U.S. small-cap companies, and AVUS targets a broad set of U.S. companies across all market capitalizations. The funds are designed to increase expected returns by focusing on firms trading at what are believed to be low valuations with higher profitability ratios.
Avantis Investors Chief Investment Officer Eduardo Repetto recently told VettaFi’s Head of Research Todd Rosenbluth that while index funds “deliver some advantages to investors, like tax efficiency, low fees,” and transparency, “indexes also come with a lot of drawbacks.”
“For example, indexes don’t use current market information [or] current prices when they decide to buy or to hold a security,” he said.
By contrast, Avantis’ actively managed ETFs “are trying to keep all the benefits of indexing,” but “also trying to add value by considering the price of every security” when deciding to buy or sell the security.
For more news, information, and strategy, visit the Core Strategies Channel.
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