What Is An Actively Managed ETF?
An actively managed ETF is a vehicle that utilizes a portfolio manager(s) or investment team to make investment decisions on behalf of the strategy. These investment professionals will ‘actively’ buy and sell securities to adjust to changing market conditions. An active ETF structure allows the investment manager the freedom to invest in their highest conviction ideas while not being obligated to pursue positions strictly because it is in an index or benchmark.
This dynamic approach affords the investment manager the ability to respond to the current market environment and pursue the ETF’s investment objective—usually to provide better-than-market results for investors.
The Importance of Actively Managed ETFs
During volatile market conditions, including active ETFs in a portfolio can potentially help investors diversify away from the crowded or less attractive areas of the market and provide better positioning in response to market downturns.
* Diversification does not ensure a profit or guarantee against a loss.
Active vs. Passive ETFs
- Portfolios are managed by investment professionals who utilize stock research to determine what securities to hold and in what percentage.
- Active ETFs will utilize experienced investment professionals who consider company-specific valuations, news, industry trends, and macroeconomic factors when constructing the portfolio.
- ‘Active’ approach will tend to result in a portfolio that differs from that of an index.
- Performance of an active ETF can differ greatly from its stated benchmark.
- Typically try and track an index (i.e., S&P 500, MSCI EAFE, Russell 2000) by investing in the same securities at roughly the same weighting.
- Mirroring of an index can also occur by purchasing a subset of securities that best represents the index’s correlation, risk, and exposures.
- Performance of a passive ETF is designed to be in line with a stated benchmark, with very little deviation.
- Since there is little to no research that is needed to mirror an index, fees are generally lower than actively managed ETFs.
Know the Difference
|Goal||Aims to outperform a stated benchmark.||Aims to track the performance of a stated benchmark.|
|Approach||Ability to react to changing market conditions by buying and selling positions more frequently.||Buy and hold strategy. Designed to mimic the holdings, sector exposures, and/or risk profile of a benchmark.|
|Pros||Potential to significantly outperform a benchmark (add alpha).||Fees are generally lower than active ETFs.|
|Cons||Fees are generally higher than passive ETFs.||Less likely to outperform the benchmark.|
Investing involves risk, including the possible loss of principal. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging Markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. The Fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund’s gains or losses. With short sales, you risk paying more for a security than you received from its sale. Short sales losses are potentially unlimited and the expenses involved with the shorting strategy may negatively impact the performance of the Fund. The Cambiar Aggressive Value ETF is a non-diversified fund. The Fund pursues a “value style” of investing. Value investing focuses on companies whose stock appears undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If the Adviser’s assessment of market conditions, or a company’s value or prospects for meeting or exceeding earnings expectations is inaccurate, the Fund could suffer losses or produce poor performance relative to other funds or market benchmarks. The Fund may trade securities actively, which could increase its transaction costs (thereby lowering its performance) and could increase the amount of taxes you owe by generating short-term gains, which may be taxed at a higher rate. There is no guarantee that the Fund will meet its stated objectives.
To determine if a Fund is an appropriate investment for you, carefully consider the Fund’s investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Fund’s summary or statutory prospectus which can be obtained by clicking here or calling 1-866-777-8227. Please read it carefully before investing.
Cambiar Funds are distributed by SEI Investments Distribution Co., 1 Freedom Valley Dr. Oaks, PA 19456, which is not affiliated with the Advisor. Cambiar Funds are available to US investors only. Strategies included within the Separate Account section are not mutual funds and are not affiliated with SEI Investments Distribution Co.
Alpha – A measure of the difference between a portfolio’s actual returns and its expected performance, given its level of risk as measured by beta. A positive Alpha figure indicates the portfolio has performed better than its beta would predict. In contrast, a negative Alpha indicates the portfolio has underperformed, given the expectations established by beta.