Total assets held by actively run ETFs in the US have hit the $1 trillion milestone, as investors sink cash into a new generation of strategies — shaking up the passive reputation of this booming corner of money management.
A combination of market gains and inflows carried total assets over the trillion-dollar landmark this week, according to Bloomberg data. While classic index-tracking funds dominate the trading landscape, demand for the tax-efficient wrapper is ramping up across ETFs that allow managers to deviate from the benchmark for additional returns. Cash is flying into funds riding everything from vanilla fixed income and structured credit, to crypto and leveraged stock trades.
Investors continue to exploit the industry’s fiscal and liquidity advantages in the ETF-for-everything era. The balance of power remains with benchmark-hugging strategies with their assets totaling $9.6 trillion. But active funds are playing catch-up, attracting $112 billion so far this year compared with passive’s $175 billion.
“Active ETFs are now being embraced the same way that index-tracking ETFs were when they first launched,” said Amrita Nandakumar, president of ETF sub-adviser Vident Asset Management. “It is a role-reversal from mutual funds, which started off actively managed until John Bogle launched the first S&P 500 mutual fund in the late 70s.”
Derivatives-powered strategies have led new debuts in the category, with 54% of the launches in February utilizing them in some way or form, data compiled by Bloomberg Intelligence show. Retail favorites include strategies such as double leveraged single-stock, so-called return-stacking and managed futures.
This year, nearly $5 billion alone rushed into Janus Henderson’s ETF tracking collateralized loan obligations (ticker JAAA), fueled by investors seeking exposure to floating rates. JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) and Direxion Daily TSLA Bull 2X Shares (TSLL) took in $3 billion each.
