Sandra Testani, CFA, CAIA, Head of ETF Product and Strategy at American Century Investments, has published research1 exploring the reasons for the growth of active ETFs and how the broader ETF sector has reached $9 trillion in assets. Join Testani and her colleague Rene Casis, VP & Head of Portfolio Solutions, for a webcast exploring the evolution of exchange-traded funds.
ETFs provide a number of benefits to investors, including low fees, tax efficiency, trading flexibility, and enhanced transparency. Though they retain nearly 70% of the fund industry’s assets under management, mutual funds experienced over $1.2 trillion in outflows, while ETF inflows totaled over $4.4 trillion since 2014. Testani notes that outflows from mutual funds are likely to continue as investors enjoy the tax efficiency of ETFs, and many top mutual funds are converting to ETFs or launching ETFs alongside their mutual fund offerings.
ETFs started as passive, index-tracking funds, but active ETFs have been growing asset share since 2019. The share of ETF flows directed into active funds has risen from 15% in 2022 to 31% in the first five months of 2024. Over the last five years, assets in active ETFs have grown at an average annual rate of 40%, reaching $735 billion in July 2024, about 8% of the total ETF market.
Advisors use active ETFs in portfolio construction in similar ways as they use passive ETFs. Active ETFs may be more flexible in reacting to market conditions and can be used to gain exposure to specific investment themes. Active ETFs are likely to continue to grow share relative to both passive ETFs and active mutual funds due to the combination of lower costs, tax efficiency, and investment flexibility.
Resources:
Understanding the Tax Efficiency of ETFs
WEBCAST – The Evolution Of Exchange Traded Funds
Active ETFs have seen significant growth over the last five years and 2024 is shaping to be another record year for active ETFs. Over 20% of the net flows into ETFs were allocated to active strategies so far this year, despite active representing only 8% of the assets*.
The momentum seems clearly behind active ETFs as more investors seek the benefits of the structure and innovation within it. Join us for a timely discussion on the opportunities in active ETFs:
- Identify key drivers behind investors embracing active ETFs
- Compare the tax and cost efficiency of ETFs relative to other investment vehicles.
- Learn how you can use active ETFs to help you build diversified, tax-efficient and cost-effective portfolios.
Featured Speakers:
Sandra Testani, VP, Head of ETF Product & Strategy – American Century Investments
Rene Casis, VP & Head of Portfolio Solutions – American Century Investments
1Asset and flow data as reported by Morningstar Direct as of 03/31/2024.
*As of July 31, 2024. Source: Morningstar Direct.
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