ETF Edge, February 12, 2024

13 Feb 2024 (9 months ago)

Active ETFs

Active ETFs are gaining popularity, with 75% of all ETF launches in 2023 being active.
Option-based ETFs that collect premiums and protect against downside risk were popular in 2022 but may underperform in rising markets.
Dimensional Fund Advisors focuses on factor-based investing and believes active management can help investors achieve long-term goals.
Active ETFs provide daily transparency into their holdings, allowing investors to see what is being held in their portfolios.
Active ETFs can help investors manage concentration risk by providing more choice and flexibility in portfolio construction.
The use of both active and passive ETFs can help manage concentration risk.

Systematic active management focuses on targeting premiums through better diversification strategies.
Systematic active management offers the benefits of diversification and low indexing costs while outperforming traditional stock-picking active management.
Investors can consider systematic active management as a balance between passive and active investing, without having to choose exclusively between the two.

Trends in active investing include the acquisition of bond and fixed income ETFs, the search for income, and the launch of floating rate ETFs to meet customer needs.
The conversion of some mutual funds into ETFs is a growing trend, allowing portfolio managers to take advantage of ETF benefits.
Options-based strategies and licensing of indexes like the NASDAQ 100 provide opportunities for repackaging and selling investment products.

Thematic Tech investing, including areas like cybersecurity, robotics, cloud computing, electric vehicles, and social media, has experienced fluctuations over the past decade.
Artificial intelligence ETFs, such as IRBT, BOTS, and ROBO, have gained attention and popularity in recent times.

Advisors play a crucial role in helping investors stay on track and avoid mistakes due to intraday noise.
The challenge for advisors is to connect more deeply with clients as AI handles routine tasks.
Financial advisors are shifting from being order takers to guides, helping clients achieve their goals and manage their dreams.

Generative AI has shifted the focus from AI investments to how financial advisors can use AI tools to enhance their services.
AI tools can now generate financial podcasts and text, freeing up advisors' time for deeper client relationships and additional tasks.
AI is getting better at generating content, but it is not yet able to truly understand people and their individual struggles.
AI-generated content can be accurate, but it is important for humans to know how to prompt it properly to avoid mistakes.