Ed Rosenburg, American Century’s head of ETFs, sees opportunity.
“When markets go down, indexes are at a disadvantage,” he said. “Active managers are trying to get rid of those quote-unquote ‘bad stocks.’ Active management in periods of stress tends to outperform.”
But the premise that stock pickers can limit losses has been thrown into question during this sell-off. U.S. funds led by active money managers trailed the main indexes by 1.3 percentage points from the end of February through March 25, according to Bernstein Research. Peers in Europe were 3.3 points behind.
Even before the current market volatility, there were questions about demand for active non-transparent products. Investors are rarely looking for more mystery in their holdings. These ETFs also have a higher expense ratio than their passive peers.
Giants like Goldman Sachs, Fidelity Investments and Invesco Ltd. are among those currently competing to launch similar funds to American Century. Thursday sees the debut of the American Century Focused Dynamic Growth ETF, ticker FDG, which invests in early and rapid stage growth companies, and the American Century Focused Large Cap Value ETF, or FLV, which holds companies in the Russell 1000 Index.
“The industry collectively is going to be watching this,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “It’ll be important to see out of the gate how these products function and whether there is demand in the coming months.”
This article was provided by Bloomberg News.