Investors have turned away from underperforming actively managed mutual funds and funneled money into passive exchange traded funds. However, actively managed ETFs have been outperforming their typical index fund counterparts so far this year, according to a recent report.
Actively managed stock ETFs have gained an average 7.8% year-to-date, whereas index fund competitors increased 5.6%, reports Brendan Conway for Barron’s.
Meanwhile, less than one in three large-cap managers is outperforming the Russell 1000 year-to-date. [Beyond Indexing: ‘Alpha’ ETFs Threaten Mutual Funds]
The AdvisorShares TrimTabs Float Shrink ETF (TTFS) , for example, is one of the best performers, with a year-to-date rise of 8.2%. The active fund tries to outperform the Russell 3000 with less volatility by investing in stocks that have shown high liquidity and fundamental characteristics associated with superior long-term performance. TTFS has an expense ratio of 0.99%.
Additionally, “alternative asset” active ETFs have outperformed, compared to similar passive index funds. For instance, the AdvisorShares Cambria Global Tactical ETF (NYSEArca; GTAA) is 2.24% higher year-to-date and the AdvisorShares Meidell Tactical Advantage ETF (MATH) is up 2.1% so far this year.
Nevertheless, active funds have been slow on the uptake.
“Advisers aren’t going to take a chance with actively managed ETFs in separate accounts until they’ve built strong long-term track records or attracted more well-known [mutual fund] managers,” Kim Arthur, chief investment officer at Main Management, said.
For more information on active funds, visit our actively managed ETFs category.
Max Chen contributed to this article.
- exchange traded funds
- index fund