Actively managed exchange-traded funds (ETFs) go beyond replicating a benchmark index. So how do managers of active ETFs decide which investments to go for? How do they make choices such as the addition of ESG considerations to their selection criteria?
Watch our video for more on these investment strategies which can generate alpha for investors or help them meet their sustainable investment goals
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What is an active ETF?
Since 2015, regulatory changes and new technologies have paved the way for the creation of actively-managed ETFs.
Bonds | Equities | Real Estates
Have you heard about them? Unlike traditional passively-managed ETFs which replicate the performance of a specific index or benchmark, active ETFs seek to outperform a benchmark or achieve a specific investment objective through active investment decisions.
An actively-managed ETF is built and managed by an investment team who decide which assets it holds.
This differs from a traditional index or passive investment strategy which simply replicates what’s held in the index.Both active and passive ETFs provide daily transparency of holdings.
However, active ETFs offer you the potential for higher returns at a higher price, as they draw upon the expertise of portfolio managers.
Active ETFs are based on either fundamental financial analysis or sustainable research focused on extra-financial criteria such as the integration of environmental, social and governance (ESG) considerations.
Why would you choose active ETFs?
They are designed for investors with precise goals such as potential alpha generation or a sustainable investment objectives while benefiting from the liquidity and cost efficiency of the ETF structure. As a result, the active ETF market has grown fast in recent years and is expected to continue to evolve.
