Active Equity Investors Outperform Market And S&P 500 in Q2 – Financial Advisor Magazine
Active equity fund investors outperformed equity index fund investors and the S&P 500 in the second quarter, and they also withdrew less assets than their peers, according to a recent Dalbar analysis.
“The average active equity fund investor outperformed the average equity index fund investor by 223 bps in the second quarter (20.97% for active versus 18.74% for index),” the Massachusetts-based financial data company reported.
"We're not surprised that investors are coming back to active management in uncertain times,” said Karen Barr, President & CEO, Investment Adviser Association. "We've long believed that active management enables investors to navigate complexity, customize portfolios, better manage risk, capitalize on specific skills or simply profit from market inefficiencies," Barr added.
These findings affirm active managers’ value during the first few months of the pandemic. However, to best appreciate active managers’ performance, investors should evaluate performance over full market cycles. An over emphasis on the short-term can encourage performance chasing which does investors a disservice.
Why It Might Be Time to Invest in Non-U.S. Stocks – Wall Street Journal
U.S. stocks have been the better bet for a decade. With those valuations now so high, the question is whether it makes sense to shift some exposure overseas, writes Dan Weill of the Wall Street Journal.
Areas where investors might invest include Europe and Emerging Markets. “Some investment managers are particularly enthusiastic about emerging markets, where stocks already have outperformed their U.S. counterparts over the past three months,” writes the Journal. On the pandemic front, a number of emerging-markets countries have done well fighting COVID-19.
Many developed countries, as well, are ahead of the U.S. in the coronavirus cycle. “We’re seeing signs of a potential second wave in countries like Spain and France,” according to Amanda Agati, chief investment strategist for PNC Financial Services Group. “But they’ve already proven they can deal with a temporary shutdown, whereas the U.S. is still struggling with that initial wave.”
How best can investors gain access to these markets?
While broad ETFs offer a convenient, inexpensive option, indicates Karim Ahamed, a financial adviser at Cerity Partners, a good active manager can provide more downside protection. As such, he recommends a combination of active and passive funds.
'Active' Stock ETFs Draw Billions in New Assets – Wall Street Journal
The early numbers are in and they bode well for this new investment class. According to the Journal, the surge in active equity ETFs, which already have more than $100 billion in assets under management, had its genesis in the SEC’s decision to allow some stock ETFs to operate without disclosing their holdings every day—a requirement that still applies to passive ETFs.
Sometimes referred to as Active Non-Transparent ETFs (ANTs), the new vehicle allows managers to disclose their holdings quarterly, as mutual funds do. That, according to the Journal allows them to pursue their investment strategies without fear that public knowledge of their every move would cause market reactions that would thwart their objectives.
The actively managed funds have the same advantages as other ETFs, when compared with mutual funds: lower fees, the liquidity of continuous intraday trading, and tax efficiency.
The Journal reports that some market analysts expect demand for active equity ETFs to continue growing. “I think we’re going to see more of them,” says Todd Rosenbluth, head of ETF and mutual-fund research at CFRA. “For investors, it’s a positive, because some prefer active management that gives them more choices from well-established active managers.”