Displaying items by tag: outperformance

Some trends were definitely starting to take hold in 2021, but those are going to continue to flourish in 2022. The first of which is an active fund take over, as it appears active fund starts will outpace passive funds and see huge inflows on top of it. The next biggest trend will be more RIA’s rolling up their proprietary model portfolios into ETF launches. These model-based funds are the best way for professionals to package their expertise and deliver it effectively to clients. A number of recent SEC policies make it easier for a variety of ETF launches to happen this year so expect this explosion to continue in 2022.

FINSUM: It makes sense that model portfolios will explode, firms can be more transparent about their areas of expertise by delivering them in fund form explicitly.

2021 is wrapping up which means we will have annual launch numbers for different types of ETFs. One area of surging growth is active fixed income where there were 15 new launches this year, this is quite an historic change from over 5 years ago when there were a meager 7 new funds launched. Overall the growth is staggering because a decade ago there were only about 25 active fixed income funds and there are well over 175 today. Historically low yields around the globe and significant interest rates have many investors pouring over $137 billion into active fixed income funds, as they rely on pickers to outperform the stock market. A variety of quantitative funds are popping up in fixed income leading to smart beta strategies which can also drive better returns.

FINSUM: Active fixed incomes growth has stayed stable the last five years but the explosion is no doubt a retort to the global macro factors facing fixed income managers. 

The bond market boon has been bad for many fixed income investors, and debt is coming to term in a higher inflationary environment which is eating up all the return. However, bond market investors are turning to factor based investing to earn excess returns. Factor investing is a $700 billion market in equities, and it dwarfs the $25 billion dollar fixed income factor market. Factor investor modifies indices based on factors they think can give an edge over traditional indices. Active bond factor investing can outperform traditional indices in rising yield environments, but factor investing is looking to rival these active funds with systemic decisions. A ‘smart beta’ approach will look to outperform in high yield and emerging market debt.

FINSUM: The extensive literature on systemic fixed income is relatively small, and that's why smart beta strategies have failed to take off in the bond market like they have in equities.

The bond market boom has been bad for many fixed income investors, and debt is coming to term in a higher inflationary environment which is eating up all the return. However, bond market investors are turning to factor based investing to earn excess returns. Factor investing is a $700 billion market in equities, and it dwarfs the $25 billion dollar fixed income factor market. Factor investing modifies indices based on factors they think can give an edge over traditional indices. Active bond factor investing can outperform traditional indices in rising yield environments, but factor investing is looking to rival these active funds with systemic decisions. A ‘smart beta’ approach will look to outperform in high yield and emerging market debt.

FINSUM: The extensive literature on systemic fixed income is relatively small, and that's why smart beta strategies have failed to take off in the bond market like they have in equities.

A new study for BlackRock shows exactly how active funds have an edge moving forward in the transition to net-zero emissions. Active investors’ advantage over traditional investors comes by incorporating sustainable insights, identifying climate-related financial catalysts, and seeking investment in emerging tech. Rich Kushel, Senior Managing Director at BlackRock says their strategies can identify companies and data points that generate a higher alpha. BlackRock is putting their money where their mouth is by launching an array of new active ESG funds across bond and equity markets targeting value or growth in different capitalization categories. In total, there will be nine new funds with ESG objectives.

FINSUM: The traditional rules of investment haven’t applied to ESG and technology, so a new set of analytical insights and active management may outperform traditional analysis.