Displaying items by tag: active ETF

The active Exchange-Traded Fund (ETF) market in the US is experiencing rapid growth, with assets expanding from $81 billion in 2019 to $631 billion in 2024. Despite this surge, active ETFs still comprise only 6% of total active Assets Under Management (AUM), suggesting significant room for expansion. However, success in this space is not guaranteed. A small number of dominant funds and managers capture a disproportionate share of flows, and early asset accumulation – particularly in the first year – is a critical determinant of long-term success.

The paper outlines three strategic imperatives for managers looking to launch or scale active ETFs: 

1. Go with the flow -Success hinges on robust distribution, particularly within Registered Investment Advisor (RIA) channels, which account for the majority of active ETF assets. Managers must align with the right distributors and tailor outreach to platform-specific dynamics, recognizing that entry barriers are higher in brokerdealer and wirehouse channels. 
2. Pick a lane -Leading managers have thrived by leveraging one or more of the following: unique investment strategies (e.g., innovation, income), proprietary distribution channels and strong brand identity. While hitting on all three is unlikely, identifying and doubling down on one’s inherent strengths is essential. 
3. Less is more -Focused engagement with high-potential advisors who already use active ETFs significantly improves conversion and gross sales. By prioritizing advisor scoring and segmentation, managers can better allocate resources and boost early momentum. Other key insights include the diversification of active ETFs beyond bonds to equities and niche strategies, declining concentration among top managers and the critical role of tailored incentive structures for internal sales teams during the launch phase. Ultimately, while the market presents significant tailwinds, achieving “escape velocity” requires precise execution across product design, distribution, marketing and sales

Access the paper here.

With inflation concerns lingering, advisors are closely monitoring the Federal Reserve’s next moves. The Fed held interest rates steady but raised its inflation forecast for the year, while also trimming its growth projection to 1.7%. 

Despite expectations for two rate cuts in 2024, economic uncertainty and potential trade disputes make forecasting difficult. Fixed income investors must remain adaptable, balancing inflation risks with the Fed’s evolving stance. 

Actively managed bond ETFs, such as the Eaton Vance Total Return Bond ETF (EVTR), offer flexibility in navigating rate shifts. By blending investment-grade debt with selective high-yield exposure, EVTR seeks to optimize returns while mitigating risk in an unpredictable market.

Finsum: Active fixed income tends to dominate in macro markets, and that is the current environment that is current environment exactly. 

American Century Investments recently launched a new actively managed fixed-income ETF targeting floating-rate debt securities. The American Century Multisector Floating Income ETF (FUSI) trades on the NYSE Arca and has an expense ratio of 0.27%. FUSI seeks to complement an investor's core bond holdings with current income, broad diversification, and the potential to mitigate the impact of rising rates. The ETF invests across various floating rate security segments including collateralized loan obligations (CLOs), commercial mortgages, residential mortgages, corporate credit, and other similarly structured investments. Plus, up to 35% of the portfolio may be allocated to high-yield securities including bank loans and other lower-rated floating-rate debt. Managers Charles Tan, Jason Greenblath, and Peter Van Gelderen build the ETF’s portfolio using a sector rotation approach that combines macroeconomic inputs, technical analysis of the relative value among various sectors, and fundamental research on individual securities. As part of the launch, Sandra Testani, Vice President of ETF Product and Strategy, stated, “FUSI compliments our current ETF income.” She also noted that “We believe a diversified floating rate mandate has the potential to mitigate downside risk and increase income, and we are excited to offer this on our ETF platform.”

Finsum:American Century recently launched the actively managed American Century Multisector Floating Income ETF (FUSI), which invests across various floating rate security segments such as CLOs, commercial mortgages, residential mortgages, and corporate credit.