Displaying items by tag: active etfs
The Battle Between Structured Notes and Active ETFs
At the ETFs Summit hosted by S&P Dow Jones and the Mexican Stock Exchange, industry leaders predicted that active ETFs will continue growing rapidly, drawing market share not only from mutual funds but increasingly from structured notes. Structured notes—once prized for their customization—are losing ground as active ETFs replicate similar strategies with added liquidity, transparency, and without the counterparty risk inherent in notes.
Retrocession fees no longer necessary, ETFs provide institutional-class access with real-time pricing, something structured notes cannot offer. While structured notes often come with hidden complexities and limited tradability, active ETFs deliver the same exposure with the ease of public market trading and daily liquidity.
This shift is part of a larger industry trend: of 600 ETFs launched last year, 400 were actively managed, signaling innovation is now happening more through ETFs than through complex structured products.
Finsum: As ETFs expand their reach across asset classes, including private credit and crypto, their dominance over less liquid, opaque vehicles like structured notes seems increasingly likely.
Active ETF Race Picking Up Steam
Capital Group and BlackRock both launched new active ETFs this week, reflecting how demand from advisors and asset allocators is pushing active ETF innovation into fresh territory.
Capital Group unveiled three funds — a large-cap growth ETF, a large-cap value ETF, and a high-yield bond ETF — as it expands beyond its traditional mutual fund business and deepens ties with RIAs seeking tax-efficient, actively managed building blocks for their model portfolios. These new ETFs build on Capital Group’s push to support advisors with tools like its RIA Insider platform and its recent rollout of active ETF model portfolios.
Meanwhile, BlackRock introduced the iShares Global Government Bond USD Hedged Active ETF, managed by its Global Tactical Asset Allocation team, to help diversify global bond exposure while protecting against currency swings. BlackRock’s new offering taps into growing advisor concerns over concentrated U.S. Treasury allocations and fits within its broader suite of institutional-grade active ETFs.
Finsum: These launches highlight the shift in advisor priorities toward portfolio construction and model-based solutions, with active ETFs increasingly serving as the core tools for delivering customized, fee-based client strategies.
Why are Derivative-Based Income ETFs Getting a Bump?
Derivatives income ETFs are gaining traction as investors seek lower-risk equity exposure with higher income potential, especially in volatile or flat markets. These funds, like Goldman Sachs’ Premium Income ETFs (GPIX and GPIQ), generate income by writing call options, which sacrifices some upside in strong markets but cushions downside performance and produces consistent cash flow.
This strategy offers “lower highs and higher lows” versus the broad market, making it appealing for those seeking stability and income outside traditional fixed-income vehicles. The funds use dynamic options coverage and diversified strike selection to balance income generation with capital preservation, typically covering 25–75% of the portfolio depending on market conditions.
Additionally, they offer potential tax advantages through return of capital distributions, which delay tax obligations until shares are sold.
Finsum: With steady distribution rates and independence from interest rate movements, these ETFs are increasingly attractive for retirement portfolios and income-focused investors.
Explaining the Active Fund Wave
The bond market is undergoing a profound transformation as actively managed fixed-income ETFs gain traction among investors looking for more agile solutions. These funds combine strategic bond selection with the flexibility and transparency of the ETF format, offering a powerful tool for navigating an environment defined by volatility and uncertainty.
Unlike passive strategies tied to static benchmarks, active managers can explore underfollowed sectors of the bond market, aiming for higher yields and stronger risk management. The ETF Rule of 2019 opened the floodgates for innovation, helping fuel a surge in actively managed ETF launches and inflows, particularly in fixed income.
Investors are drawn to the structure’s real-time trading, lower embedded costs, and resilience in stressed markets—traits that are increasingly valuable in a dynamic rate environment.
Finsum: Active fixed-income ETFs are becoming a key component of modern portfolio construction, reshaping how investors engage with the bond market.
Active Managers Are Eyeing These Funds
The Invesco QQQ Trust and Invesco NASDAQ 100 ETF continue to serve as efficient vehicles for tapping into the performance of leading large-cap growth stocks through their tracking of the Nasdaq-100 Index. While passively managed, these funds remain highly relevant for active investors, especially as many portfolio managers increase exposure to familiar tech giants.
During the first quarter of 2025, a temporary pullback in mega-cap names prompted several high-performing active managers to increase holdings in companies like Alphabet, Amazon, Microsoft, and Nvidia.
These four names, which collectively represent over a quarter of the QQQ and QQQM portfolios, have shown resilience and strong earnings momentum, particularly in areas like cloud computing and artificial intelligence. Microsoft’s Azure business, for instance, exceeded expectations with robust demand for AI services, while Amazon rebounded following earlier weakness tied to trade concerns.
Finsum: As fundamentals remain intact and investor interest stays elevated, these ETFs continue to offer a compelling entry point into the most influential names in the growth space.