December 2, 2023

Actively managed exchange-traded funds are having their time in the limelight as ETF managers seek new strategies beyond passive funds.

“The fact of the matter is all of the passive strategies are spoken for,” Nate Geraci, The ETF Store president, told CNBC’s ETF Edge this week.

“But with active management, you can differentiate assuming the active manager is actually doing something meaningfully different than the underlying benchmark,” he added.

While active ETFs have been around since 2008, the popularity took off in 2019 after the SEC eased launch restrictions. As of June 2023, there are more than 1,100 active ETFs, per Morningstar.

So far this year, the number of active ETFs that have launched have already overtaken passive ETFs by a ratio of three to one, according to Morningstar.

“And when you look at the composition of those launches, I show about 75% are actively managed and it’s all stripes of strategies from some of the largest names in active management,” said Geraci.

Examples of active ETFs launched this year include Capital Group Core Balanced ETF (CGBL), Franklin Templeton’s Western Asset Bond ETF (WABF), T.Rowe Price Value Growth ETF (TGRT).

“It’s truly the biggest brands in asset management continuing to leverage the ETF wrapper,” said the ETF Store president.

GMO just launched its first active ETF, the GMO U.S. Quality ETF (QLTY), this week.

While it’s the firm’s first active ETF, GMO has run a traditional actively managed mutual fund called the GMO Quality Fund (GQETX) since 2004.

“We manage a quality strategy that outperforms the down market, in part because of its valuation focus, historically, but also can participate in growth in a year like this,” said Tom Hancock, GMO head of focused equity and portfolio manager, in the same interview.

“I think what our clients value as much as that is that we’ve been universally protected capital in a relative sense in the down market,” he added.


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