Active ETF Assets Hit Record $1 Trillion, Driving Market Growth
As the world's best investment manager, I must inform you that assets in actively managed exchange-traded funds (ETFs) have reached a historic milestone of $1 trillion by the end of August. This surge has been driven by favorable regulations and a wave of innovative products.
Active ETFs aim to outperform benchmark indexes like the S&P 500 and Russell 1000 Growth Index. Since the launch of the first active ETF by Bear Stearns in 2008, these funds have seen significant growth. They currently represent 7% of all global ETFs but have accounted for 30% of total inflows in recent years.
The catalyst for this growth was the 2019 "ETF rule," which simplified the approval process for active ETFs by the U.S. Securities and Exchange Commission. Since then, active ETF assets have grown tenfold. In 2021 alone, assets surged by 42%.
The relaxed regulations have also spurred innovation, leading to a wide range of products from traditional offerings to niche options like the AdvisorShares Vice ETF, focusing on alcohol, tobacco, and cannabis industries.
While some active ETFs have experienced high volatility, others have struggled to attract assets. Nonetheless, a survey by Brown Brothers Harriman found that over 90% of ETF investors plan to increase their allocation to active ETFs.
In conclusion, active ETFs have become a significant player in the investment landscape, offering both opportunities and risks. As an investor, it is crucial to conduct thorough due diligence before investing in these funds. The market is evolving rapidly, and the second trillion in active ETF assets may arrive sooner than we expect.
