Active ETFs have grown in popularity, doubling in the last two years, and they are starting to reverse the 30-year index trend invented by John Bogle. Mutual fund giants such as Fidelity, T.Rowe Price, Franklin Templeton, and American Century all have opened active funds. Driving this inflow is a series of regulatory changes that protect active fund insights and make them more tax efficient. SEC regulations have allowed semitransparent ETFs to use custom baskets and move around stocks in order to not realize gains. Semitransparent ETFs have better liquidity which allows them to cut the high transactions costs of yesteryear. Some of the fastest-growing funds are Cathie Wood’s ARK Innovation, but JPMorgan’s Ultra-Short Income, PIMCO Enhanced Short Maturity and JPMorgan’s Equity Premium Income. Finally, the current environment is allowing active funds to edge out. Active funds have thematic interests that satisfy investors at lower costs than traditional funds, and pickers outperform when there is high dispersion (as there is now).
FINSUM: Active funds are cutting costs to some of the lowest levels historically and in these tumultuous times that makes them as competitive as ever.