Noah Hamman, CEO of AdvisorShares, on how - and why - more retail investors are using active ETFs.
We're seeing advisers look for solutions beyond just traditional indexes.
They're looking for alpha managers, but they're looking to be
able to be portable with them, to be able to
move in and out of managers, things that you can't
do in traditional mutual funds that you can do in
ETFs. And then, the nice thing about active ETFs is
that they still offer the other flexibility the advisers really
look for. So trading, control, limit orders, things like that.
And when you look at the assets and the equity
mutual funds space, it's still roughly $4 out of 5
run after strategies. And I think it will get close
to that over time in the ETF spaces. Well, more
dollars will move to that. And so for advisers they
can use it just like they use ETFs today except
it's an alpha basket. It's a manager they can try
and add some value for them in their asset allocation
strategies. Most managers feel like advisers feel like they have
plenty of large cap growth and large cap value strategies.
Managers have been doing it for 20 and 40 years.
But more advisers are starting to look for things that
react to the market whether it's tactical strategies whether it's
inverse strategies, long/short strategies. Advisers are definitely looking to add
more of that into their portfolio. We looked at the
first 5 years of growth for index ETFs and active
ETFs and we've seen almost double the assets and more
than double the products in that same amount of times.
So we are already seeing it grow much more rapidly
than index space ETFs did. ETFs especially active ETFs and
401K plans are a strong area of growth. They're just
getting started in that space but over time, we expect
to see a lot of growth and we think nvestors
will be attracted to the transparency, the better operational and
tax efficiency for their 401K assets.