According to a report in Barrons, the number of active ETFs has more than doubled over the past two years, while total assets under management have tripled. In fact, nearly 60% of all ETFs launched in 2020 and 2021 were actively managed, making it one of the hottest trends in the industry. These new funds come from conventional ETF issuers and, increasingly, mutual fund giants.
Let’s look at some of the most recent active ETFs targeting opportunities in niche corners of the market.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
YUMY Targets the Future of Food
The VanEck Future of Food ETF YUMYwas launched in early December to provide investors with exposure to companies engaged in agri-food technology and innovation. In particular, portfolio managers Shawn Reynolds and Ammar James focus on food technology, precision agriculture, and agricultural sustainability opportunities.
The fund also represents VanEck’s first active ETF that incorporates bottom-up, fundamental research. With a 0.69% expense ratio, the fund is cheaper than actively managed mutual funds targeting similar themes and offers investors a compelling way to build food themes into their portfolios without purchasing individual stocks.
Currently, the ETF holds a portfolio of about 50 companies, including Corteva Inc. (CTVA), Oatly Group (OTLY), and Givuadan SA. The fund offers a relatively high level of geographical diversification, with about 42% of the portfolio located outside the United States. In sector terms, three-quarters of the portfolio is in consumer staples and materials.
AILV & AILG Leverage Big Data
Mount Yale Capital Group launched two new active ETFs earlier this month that combine manager research and selection with big data analytics to better achieve investment goals. As in many other industries, these algorithms can narrow down large datasets, enabling humans to better focus their efforts on delivering value.
The Alpha Intelligent Large-Cap Value ETF (AILV) invests in large-cap value stocks using alpha strategy, big data analytics, and machine learning to identify high-conviction opportunities. In particular, the algorithms seek out securities based on their historical performance, Sharpe ratios, capture ratios, and drawdown.
The Alpha Intelligent Large-Cap Growth ETF (AILG) uses the same big alpha strategy, big data analytics, and machine learning technologies. But instead of value factors, the ETF optimizes for growth opportunities by focusing on substantial and sustainable positive cash flow and performance levels that exceed industry peers.
AHYB Brings High-Yield Bond Expertise
American Century Investments and Nomura Asset Management launched an actively managed high-yield bond ETF in mid-November. The American Century Select High Yield ETF (AHYB) uses the same investment philosophy as the seven-year-old American Century High-Income mutual fund, focusing on BB and B-rated bonds.
The fund seeks out companies that the fund managers believe can carry debt loads across market cycles, generate sustainable cash flows, and decrease leverage on their balance sheets to pursue higher ratings. With a modest 0.45% expense ratio and monthly distributions, the fund is ideal for retirement investors seeking high current income.
American Century Investments has been one of the fastest-growing entrants into the ETF space, with 28 new ETF launches over the past three years. Many of these funds take active or factor focuses from mutual fund strategies and apply them to the tax-efficient ETF vehicle, providing investors with an alternative way to access them.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
The Bottom Line
Active ETFs have become extremely popular, outpacing passive ETF issuances over the past two years. In addition to existing ETF issuers, many large mutual fund companies are transitioning their strategies to tax-efficient ETF vehicles. As a result, investors may want to watch these new issues as potential opportunities for alpha.
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