Displaying items by tag: active management

2021 was a comeback year for active fixed Exchange Traded Funds. Driving this home was a huge set of inflows as they saw a tenth of inflows globally, many of these came from the US. That trend isn’t stopping as nearly 80% of investors are searching to expand that position in 2022. Many investors see active funds having an edge with global turmoil increasing, as Russia-Ukraine escalates, and there are many macro risks domestically. Additionally, investors are clamoring to buy more ESG ETFs in 2022 as this trend shows no signs of falling off.

Finsum: Markets were messy and pretty hard to predict in the aughts, but active management seems to have a leg up in picking tech growth as well as fixed income winners.

2021 was an all-time year for active fixed income launches, and 2022 is looking to continue that pace. Capital Group just debuted another active fixed income ETF to capitalize on this financial trend. The Capital Group Core Plus Income ETF (CGCP) will seek a higher income return for a traditional bond fund and really seek to maximize total return. With a wide swath of debt available in their targets, they can invest over a third in below investment grade securities. This launch comes amid 5 other active equity fund launches for Capital Group. Overall investors are looking for more alpha return in their portfolios and are looking to active management to find it.

Finsum: Macro factors are pushing more investors into active bond funds, with increased interest and inflation risk core analysis is more effective than ever in fixed income.

There has been an explosion in active fixed income flows in the last year. The big drivers that are pushing investors in that direction are mainly macro, as the Treasury yields have risen (lowering bond values) and passive funds haven’t moved off them rapidly enough. The other big factor is that they have flat-out outperformed. Where active equity lagged their passive counterparts data shows that almost 9 in 10 active bond funds have outperformed in the intermediate range. Overall this drove the $350 billion influx in active fond funds last year. Additionally, there were tax advantages when it came to capital gains and this efficiency was prioritized by investors.

Finsum: It's clear that the information cycle in active equity is currently outpacing the ability to beat the market, but bonds' medium-term macro influence is more predictable for active management.

Active management seems to be making a comeback, and adding to that rising rates have many investors eyeing fixed income. For overall active funds in 2020 and 2021, it was a nearly a 50/50 shot that they would outperform similar passive counterparts; in other words virtually no advantage. However, research shows that passive equity has an advantage but over the past 10-years active fixed income leads the way over passive funds. In the last decade, the average bond manager beat the Bloomberg Aggregate Bond Index nearly three-fifths of the time. However, fixed incomes risk mitigation isn’t captured here, and active funds have the advantage to adjust the risk factor over passive funds, carrying an additional advantage.

Finsum: The ultra-low interest rate environment has been the difference-maker for fixed income managers who have just capitalized better than passive funds.

BlackRock's active management has long been the forgotten investment in the firm's giant ETF basket they manage, but things are starting to turn. While the index business hit $10 trillion in the last quarter it was the active funds dring the fee growth in fact in the last quarter of 2021 they were responsible for 60% of the fee growth. The firm has poured lots of resources into their active funds and their active fixed-income has been a huge winner. The firm seems more willing now than ever to place itself as a big active manager where they have always been synonymous with passive investing. BlackRock credits its growth to its own internal push in active management but there has been a huge industry-wide surge in active funds.

FINSUM: Active equity still lags behind for lots of reasons, so its probably best to stick to direct indexing or ETFs in equity markets.