Passive or Active ETFs: Why Not Both?

Active ETFs have been recently gaining momentum among investors as market conditions shift to serve active management. But when it comes to active or passive investing, it shouldn’t be an either/or proposition.

Boston Family Advisors CIO Warren Gibbon told Barron’s that investors shouldn’t think about investments as “active or passive, but active and passive.” While he noted that passive funds have “had a number of tailwinds” over the past decade, “those tailwinds may not be as strong going forward.”

See more: “Why Active Management Is Beginning to Outshine Passive Funds

While index funds have lower fees and can replicate market returns, actively managed ETFs can offer the ability to pivot if things go sideways.

“You can have better control over what quality looks like in the form of choosing an active manager,” said PNC Financial Services Asset Management Group CIO Amanda Agati.

Between June 2022 and June 2023, 57% of active ETFs outperformed their passive counterparts, up from 43% in 2022. This shift to favoring active managers is partially due to the Fed’s aggressive monetary tightening.