Active Strategies Attract Flows Amid Market Uncertainty
May 9, 2023
More investors are turning to active strategies in this time of market turmoil.
Active ETFs made up roughly 30% of all ETF flows so far in 2023, up from 14% in 2022. That’s according to data from Bloomberg Intelligence, reported in a recent article by the Wall Street Journal.
When you consider that active ETFs make up less than 6% of the $7 trillion ETF market, the number becomes even more impressive.
It’s the focus on active management strategies and all that active has to offer – including the ability to manage risk, invest in complex and customized strategies, and invest for specific goals such as tax efficiency – that has investors turning to active products.
“If you are someone who believes that this is going to be a challenging environment, then really active management should outperform,” Principal Chief Global Strategist Seema Shah told the Wall Street Journal. “This is the time you need to know the sector, and even within sectors, there’s going to be major dispersion.”
As explained in a prior Council blog, when there is major dispersion in the market or wider differences in the range of returns, active management tends to outperform.
And the Wall Street Journal reports that we’re only at the beginning stages of the active ETF business.
“The strong flows to them are signaling that active management is likely to drive the next wave of growth for ETFs,” the article states.