A $100 Billion ETF Flood Offers Little Solace to Active Managers

At first blush, a record $100 billion flood into actively managed exchange-traded funds this year raises a tantalizing prospect: A revival of stock picking even as only Big Tech names outperform the market. Yet, a look under the hood of popular ETFs shows the boom is almost entirely taking place in passive-looking trades.

Active strategies have attracted nearly 25% of the $423 billion that’s flowed to US ETFs so far in 2023 — a record share. Meanwhile, active ETFs are launching at a record pace, making up 96% of October’s new debuts as issuers race to stake claim to a quickly growing corner of the $7.5 trillion industry, Bloomberg Intelligence data show.

But those billions aren’t being sent to the likes of traditional bond- and stockpickers. Rather, firms like Dimensional Fund Advisors and JPMorgan Asset Management have led the charge. Dimensional, the largest active ETF issuer with roughly $100 billion in assets, is known for its systematic funds. Meanwhile, JPMorgan has struck gold with its suite of covered-call ETFs, which employ options overlay strategies to generate additional yield.

While not simple index-tracking stock funds, the kind of active management catching fire at the moment is much different than placing high-conviction calls, according to ETFGI’s Deborah Fuhr.

“You don’t find a lot of active managers taking a lot of active bets,” said Fuhr, the firm’s co-founder. “It’s not fundamental active, like doing a lot of homework on the stocks and deciding what to buy. It’s more systematic.”

Active ETFs Attract Record Share