Verified Veteran Owned Business
  • Home
  • Pricing
  • Placement Services
  • Principal/Agent
  • White Label
  • News
  • Sign Up
  • Login

Money floods into active ETFs that look somewhat passive


« Return to News

At first blush, a record $100 billion flood into actively managed exchange-traded funds this year raises a tantalizing prospect: A revival of stock picking even as only Big Tech names outperform the market. Yet a look under the hood of popular ETFs shows the boom is almost entirely taking place in passive-looking trades.

Active strategies have attracted nearly 25% of the $423 billion thats flowed to U.S. ETFs so far in 2023 a record share. Meanwhile, active ETFs are launching at a record pace, making up 96% of Octobers new debuts as issuers race to stake claim to a quickly growing corner of the $7.5 trillion industry, Bloomberg Intelligence data show.

But those billions arent being sent to the likes of traditional bond and stock pickers. Rather, firms like Dimensional Fund Advisors and JPMorgan Asset Management have led the charge. Dimensional, the largest active ETF issuer with roughly $100 billion in assets, is known for its systematic funds. Meanwhile, JPMorgan has struck gold with its suite of covered-call ETFs, which employ options overlay strategies to generate additional yield. 

While not simple index-tracking stock funds, the kind of active management catching fire at the moment is much different than placing high-conviction calls, according to ETFGIs Deborah Fuhr.

You dont find a lot of active managers taking a lot of active bets, said Fuhr, the firms co-founder. Its not fundamental active, like doing a lot of homework on the stocks and deciding what to buy. Its more systematic.

Contrast that to Cathie Wood, whose $7.7 billion ARK Innovation ETF (ARKK) is the poster child for stock picking in the ETF wrapper. The funds portfolio of high-flying, disruption-themed stocks soared nearly 150% in 2020. But that performance was followed by two years of double-digit losses. During that stretch, the $30 billion JPMorgan Equity Premium Income ETF (JEPI) shattered ARKKs record for active inflows, on track to becoming the largest active ETF.

Now, even though ARKK has surged 35% this year, the fund is still sitting on significant outflows year-to-date. Instead, JPMorgans covered-call ETFs and Dimensional funds are perched atop the leaderboard this year.

PASSIVE IS FINE

Dimensionals Gerard OReilly isnt shying away from the passive label. While the quant firm isnt trying to beat out the market by identifying stocks with moonshot potential, he said that being tied to a benchmark isnt the best way to approach investing either.

Indexing is too rigid. You leave money on the table and so were non-index, but were not in the business of trying to outguess market prices, OReilly, Dimensionals co-CEO and chief investment officer, said on Bloombergs Odd Lots podcast. So passive is probably fine because passive implies that you accept market prices, you trust market prices and you try to extract information from market prices.

Despite the fact that some of the most popular active strategies are lagging indexes this year, money is still flooding in. JEPI and the $22 billion Dimensional US Core Equity 2 ETF (DFAC), for example, have climbed about 6.6% and 12.6%, respectively, on a total return basis so far in 2023. That compares to a 19% return for the S&P 500. 

IMPORTANT GAUGE

While the bulk of this years active inflows have been delivered to systematic or outcome-oriented strategies, several traditional bond- and stock-picking ETFs debuted this year. In May, Rick Rieder, BlackRock Inc.s chief investment officer for global fixed income, unveiled the BlackRock Flexible Income ETF (BINC), followed by Pacific Investment Management Co. chief investment officer Dan Ivascyns Pimco Multisector Bond Active ETF (PYLD) a month later.

Both bond funds have outperformed the Bloomberg Aggregate Bond Index since inception, despite a challenging backdrop for fixed income amid the Federal Reserves interest rate-hiking campaign. Their success or failure will be an important barometer of demand for old-school active, said Morningstar Inc.s Ben Johnson.

This year, weve seen some real marquee names come to market in the ETF wrapper for the first time. Whats going to be the future trajectory of flows for those funds? said Johnson, the firms head of client solutions. Funds like those will be the real litmus test for the prospects for what people would more conventionally identify as active packaged in the wrapper.

Why the time is right to start buying small-cap growth stocks

« Return to Dashboard

Have any Questions?

We're here to help. Send us an email or call us at +1 (585) 329-9661. Please feel free to contact our experts.

A donation will be made by Adviser First Partners to a Veterans organization on behalf of all financial professionals and firms that register each month

Contact Us

Adviser First Partners

Subscribe to our mailing list.

Veteran Owned Business

Quick Links
  • Home
  • Schedule Meeting
  • Listen & Subscribe to Our Podcast
  • Contact
  • New Item
Your Account
  • News
  • Schedule Meeting
  • Register
  • Login
  • Dashboard
  • Sign Out
  • New Item
  • New Item
Get In Touch

P.O. Box 12
Ionia, NY 14475

Phone: +1 (585) 329-9661
Email: info@adviserfirstpartners.com

© 2025 Adviser First Partners. All Rights Reserved.

Web Design by eLink Design, Inc., a Kentucky Web Design company