Institutional investors' demand for active ETFs is accelerating as they seek better returns in turbulent markets.
According to ETF.com data, one-third of all exchange-traded products are actively managed, with $396 billion in assets under management. Active ETFs have attracted a total of $16.8 billion through February 22, YTD. Almost 48% of actively managed ETFs had positive inflows compared to roughly 45% of passively managed ETFs.
A survey of 200 institutional asset owners conducted by the Boston-based research firm Cerulli Associates found that approximately one-quarter of institutional asset owners designated they would step up their allocation to active equity strategies over the next two years. Meanwhile, 20% of respondents surveyed in the latter half of 2022 said they would increase their fixed-income strategy allocations during the same period. The findings of the survey revealed that the gap between active and passive fund assets narrowed to $1.2 trillion at the end of last year, as opposed to a nearly $3 trillion gap a year before.
Data published by ETF.com shows that several actively managed ETFs have had from a few hundred to a thousand percent increase in their assets in 2023. For example, the Putnam Sustainable Leaders ETF (PLDR) gathered $340 million in new assets after starting the year with only $6 million in AUM, and the AXS 1.25X NVDA Bear Daily ETF (NVDS), amassed $59 million in assets on top of the less –than $10 million it started the year with.
According to Market Research and Money Management Firm the Leuthold Group from Minneapolis, investors pay more attention to the small caps' values because they are trading now at 25% less value than large caps and their forecast earnings P/E ratio is on average at 16 times as opposed to 19 times for large caps. Small caps are subject to the same challenges of inflation and interest rates as large caps, however, their flexibility, and value relative to large caps represent an interesting option for investors.