It’s been rough sledding lately for actively managed equity mutual funds versus their passively invested competitors. Passive funds’ inflows have been growing steadily since 2011, while active funds have experienced outflows for most of that period.
Despite the headwind of investors’ shift to passive funds, actively managed ETFs have managed to keep increasing in number and assets under management, albeit from a small initial base.
According to ETF-sponsor AdvisorShares Investments’ Active ETF Report of July 31, there are about 151 active ETFs trading with combined investment assets of $26.7 billion. Apart from declines in 2010 and 2011, both numbers have shown steady growth since the funds started operating in early 2008.
Actively managed funds each have an average $177 million of assets, but here’s the statistical catch: Median assets per fund were just $26.4 million.
The median value highlights the largest funds’ category dominance: The top five funds had 50.3% of the total AUM; the 10 largest held 65.7%, according to AdvisorShares.
For example, the largest fund, PIMCO Enhanced Short Duration ETF (MINT), accounted for $4.7 billion of total AUM. Investment strategy categories are also skewed, with fixed-income funds accounting for about 70% of assets.
Despite the dominance of the largest, fixed-income funds, the outlook for actively managed ETFs overall is positive, says Bethesda, Maryland-based Noah Hamman, AdvisorShares’ CEO. He cites several reasons for optimism.
As more funds meet Morningstar’s longevity requirement, the rating service reports their performance, and several funds have received 4- and 5-star ratings in their categories.