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Active ETFs' Assets Swelled in 2023: Inside Winners
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The investing world has been witnessing tectonic shifts lately with improving global economic fundamentals. Investors’ sentiment is now not the same as it was just after the financial meltdown in 2008. Earlier, the investing domain used to be dominated by passively managed or index-tracking funds.
Their low cost and transparent structure have made them highly coveted. On the other hand, active funds are arguably expensive as these involve research expenses associated with the manager’s due diligence and additional cost in the form of a wide bid/ask spread beyond the expense ratio.
However, the scenario has also been changing in the ETF corner. Issuers are turning more innovative and intend to come up with products that are more dynamic and suit the current improving-but-volatile market conditions.
Active ETFs have carved a significant niche within the U.S. market, boasting total assets of $549 billion across 1,349 products. This marks about 6.6% of the total $8.3 trillion in U.S. listed ETFs, signaling a growing but still developing market share.
Active ETFs have experienced significant growth in recent years, consistently attracting a minimum of $25 billion in assets annually since 2018, with an impressive organic growth rate exceeding 30% each year, per Morningstar.
Active ETFs’ Asset Grew 37% in 2023
According to a comprehensive report by Morningstar Inc., assets in actively managed ETFs saw an impressive 37% growth last year, starkly contrasting with the 8% growth observed in passive ETFs. This trend underscores a growing preference among investment advisors for ETFs as a primary investment vehicle, as quoted on an etf.com article.
Equity ETFs Lead the Charge
The equity section of active ETFs was particularly notable, registering an extraordinary growth rate of 48%. This surge reflects an increasing interest in actively managed ETFs, both within the United States and internationally.
Leading Performers and Market Dynamics
The push toward active ETFs has been beneficial for certain ETF issuers, with JPMorgan and Dimensional standing out due to significant inflows into their active strategies. JPMorgan Equity Premium IncomeETF (JEPI - Free Report) fund emerged as the largest actively managed equity ETF globally in 2023, attracting $12.8 billion in net flows. Close behind was the Dimensional U.S. Core Equity 2 ETF (DFAC - Free Report) , which secured its position as the second-largest actively managed equity ETF with approximately $4.2 billion in net flows.
Fixed-Income Funds: A Mixed Picture
Despite the fervor for active strategies in the equity domain, passive strategies continued to dominate the fixed-income fund segment in 2023. Passive index funds made up for a staggering 91% of the flows into fixed-income funds, amassing $361 billion. However, active strategies in bonds saw a modest recovery from the prior year's downturn, with positive inflows totaling $34 billion.
ETFs in Focus
Below we highlight some top-performing active ETFs of 2023 that breezed past the S&P 500.
The Valkyrie Bitcoin Miners ETF is an actively-managed exchange-traded fund that will invest at least 80% of its net assets in securities of companies that derive at least 50% of their revenue or profits from bitcoin mining operations and from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining. The fund charges 75 bps in fees.
Internet
ARK Next Generation Internet ETF (ARKW - Free Report) – Up 96.7%
The ARK Next Generation Internet ETF is an actively managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily in domestic and U.S. exchange traded foreign equity securities of companies that are relevant to the theme of next generation internet. The fund charges 88 bps in fees.
The ARK Fintech Innovation ETF is actively managed and seeks long-term growth of capital. ARKF is an actively managed ETF that seeks long-term growth of capital. It seeks to achieve this investment objective by investing under normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s investment theme of financial technology (“Fintech”) innovation. The fund charges 75 bps in fees.
The Spear Alpha ETF invests in companies that are poised to benefit from breakthrough trends in industrial technology including enterprise digitalization, automation & robotics, AI, environmental focus and decarbonization, photonics and additive manufacturing and space exploration. The fund charges 75 bps in fees.
Consumer Discretionary
Simplify Volt RoboCar Disruption and Tech ETF (VCAR - Free Report) – Up 61.0%
The Simplify Volt RoboCar Disruption and Tech ETF seeks to concentrate in those few disruptive companies poised to dominate autonomous driving and then enhance the concentrated exposures with options. The fund charges 99 bps in fees.
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Active ETFs' Assets Swelled in 2023: Inside Winners
The investing world has been witnessing tectonic shifts lately with improving global economic fundamentals. Investors’ sentiment is now not the same as it was just after the financial meltdown in 2008. Earlier, the investing domain used to be dominated by passively managed or index-tracking funds.
Their low cost and transparent structure have made them highly coveted. On the other hand, active funds are arguably expensive as these involve research expenses associated with the manager’s due diligence and additional cost in the form of a wide bid/ask spread beyond the expense ratio.
However, the scenario has also been changing in the ETF corner. Issuers are turning more innovative and intend to come up with products that are more dynamic and suit the current improving-but-volatile market conditions.
Active ETFs have carved a significant niche within the U.S. market, boasting total assets of $549 billion across 1,349 products. This marks about 6.6% of the total $8.3 trillion in U.S. listed ETFs, signaling a growing but still developing market share.
Active ETFs have experienced significant growth in recent years, consistently attracting a minimum of $25 billion in assets annually since 2018, with an impressive organic growth rate exceeding 30% each year, per Morningstar.
Active ETFs’ Asset Grew 37% in 2023
According to a comprehensive report by Morningstar Inc., assets in actively managed ETFs saw an impressive 37% growth last year, starkly contrasting with the 8% growth observed in passive ETFs. This trend underscores a growing preference among investment advisors for ETFs as a primary investment vehicle, as quoted on an etf.com article.
Equity ETFs Lead the Charge
The equity section of active ETFs was particularly notable, registering an extraordinary growth rate of 48%. This surge reflects an increasing interest in actively managed ETFs, both within the United States and internationally.
Leading Performers and Market Dynamics
The push toward active ETFs has been beneficial for certain ETF issuers, with JPMorgan and Dimensional standing out due to significant inflows into their active strategies. JPMorgan Equity Premium Income ETF (JEPI - Free Report) fund emerged as the largest actively managed equity ETF globally in 2023, attracting $12.8 billion in net flows. Close behind was the Dimensional U.S. Core Equity 2 ETF (DFAC - Free Report) , which secured its position as the second-largest actively managed equity ETF with approximately $4.2 billion in net flows.
Fixed-Income Funds: A Mixed Picture
Despite the fervor for active strategies in the equity domain, passive strategies continued to dominate the fixed-income fund segment in 2023. Passive index funds made up for a staggering 91% of the flows into fixed-income funds, amassing $361 billion. However, active strategies in bonds saw a modest recovery from the prior year's downturn, with positive inflows totaling $34 billion.
ETFs in Focus
Below we highlight some top-performing active ETFs of 2023 that breezed past the S&P 500.
Bitcoin Miner
Valkyrie Bitcoin Miners ETF (WGMI - Free Report) – Up 297.8%
The Valkyrie Bitcoin Miners ETF is an actively-managed exchange-traded fund that will invest at least 80% of its net assets in securities of companies that derive at least 50% of their revenue or profits from bitcoin mining operations and from providing specialized chips, hardware and software or other services to companies engaged in bitcoin mining. The fund charges 75 bps in fees.
Internet
ARK Next Generation Internet ETF (ARKW - Free Report) – Up 96.7%
The ARK Next Generation Internet ETF is an actively managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily in domestic and U.S. exchange traded foreign equity securities of companies that are relevant to the theme of next generation internet. The fund charges 88 bps in fees.
Fintech
ARK Fintech Innovation ETF (ARKF - Free Report) – Up 91.8%
The ARK Fintech Innovation ETF is actively managed and seeks long-term growth of capital. ARKF is an actively managed ETF that seeks long-term growth of capital. It seeks to achieve this investment objective by investing under normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s investment theme of financial technology (“Fintech”) innovation. The fund charges 75 bps in fees.
All-Cap Growth
Spear Alpha ETF (SPRX - Free Report) – Up 86.8%
The Spear Alpha ETF invests in companies that are poised to benefit from breakthrough trends in industrial technology including enterprise digitalization, automation & robotics, AI, environmental focus and decarbonization, photonics and additive manufacturing and space exploration. The fund charges 75 bps in fees.
Consumer Discretionary
Simplify Volt RoboCar Disruption and Tech ETF (VCAR - Free Report) – Up 61.0%
The Simplify Volt RoboCar Disruption and Tech ETF seeks to concentrate in those few disruptive companies poised to dominate autonomous driving and then enhance the concentrated exposures with options. The fund charges 99 bps in fees.