The Year in Active Management: Highlights from 2024

December 18, 2024

The end of the year is a time to reflect. Here at the Active Managers Council, we want to join in the spirit of the season and highlight key developments in the active management landscape in 2024.

1. Active ETFs take center stage. The growth in active ETFs is getting the spotlight. Morningstar reports that over 300 active ETFs were launched in just the first 9 months of 2024. And the trend seems likely to continue, given the growing adviser interest in the vehicles; a recent survey from Natixis found that over half of advisers plan to increase their use of active ETFs. To help advisers and investors understand the trend, the Active Managers Council released “What is an Active ETF?”, the second installment of its explainer video series which started with “What is Active Management?”
2. SEC commissioner concerned about regulatory bias. In an August statement, Commissioner Mark Uyeda expresses concern that the SEC’s regulatory regime effectively favors passive investing over active management strategies. Uyeda explains that recent rule adoptions have a disproportionate effect on smaller asset managers, which include many active managers.
3. White paper highlights active nature of index investing. Investors may think of index funds as a way to achieve broad, passive exposure to a market or asset class, but index providers make many active choices when constructing indexes, explains Karen Umland, Senior Investment Director and Vice President at Dimensional, in a February white paper. Investors in index funds must take these active decisions into account when constructing portfolios, she argues.
4. Younger generations embrace active through alternatives. Investors aged 21 to 43 are investing 17% of their portfolios in alternatives such as private equity; that’s more than three times the exposure of investors ages 44 and up, according to Bank of America’s 2024 Study of Wealthy Americans. Younger generations don’t believe that they can achieve above-average returns by investing solely in traditional stocks and bonds, and they are turning to actively-managed alternatives to achieve those returns.
5. Investors recognize both active and passive are valuable. A survey from Envestnet and Wealth Management IQ finds that 87% of financial advisers combine active and passive approaches when building portfolios for clients, with only 13% using either approach exclusively. “The active/passive wars are over and both sides have won,” the report concludes.
6. Market efficiency benefits of active get renewed attention. Markets are efficient because active managers perform the fundamental research needed to establish the value of companies. This key role of active management was given renewed attention in 2024 in comments from Ken Griffin, founder and CEO of Citadel, a recent paper from Felix von Moltke of the University of Oxford and Torsten Sløk of Apollo, and a review of the academic literature on the relationship between active investing and market efficiency from Theresa Hamacher.
7. Active Managers Council counters the false dichotomy narrative. In an article in the May/June issue of Investments and Wealth Monitor, Apurva Schwartz, chair of the Council’s Thought Leadership Task Force and portfolio specialist at Council member Harding Loevner, provides an alternative to the false narrative that pits active against passive. Her counternarrative: (1) Active and passive are both important; (2) Active managers do outperform; and (3) Active management generally does cost more but often because it provides greater benefit.