Active ETFs Are Evolving: Here’s How

ETFs strategies have proliferated since the arrival of the ETF rule in 2019. The wrapper’s myriad advantages, from tax efficiency to tradability, have made it a very popular choice for investors and asset managers alike. That has seen active ETFs in particular grow significantly in recent years, with the category evolving notably by combining ETF and active flexibility.

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Comparing the various active ETFs out there and their approaches can help illustrate that growth. American Century Investments, for example, offers some intriguing takes on active equity and fixed income ETFs. Some of its largest active ETFs combine active flexibility and focus with some of the benefits of indexing tracking, like lower costs and diversification.

The Avantis U.S. Small Cap Value ETF (AVUV) captures much of that approach and its benefits, offered by the firm’s Avantis Investors shop. The fund charges a 25 basis point (bps) fee to offer a systematic approach investing in small-cap firms meeting value criteria. That has helped AVUV add more than $5.5 billion in AUM over the last twelve months per ETF Database — lifting the fund over $20 billion in total AUM. The strategy has returned 12.1% over the last three months with that approach.

Active ETFs: Continuing to Grow

Active ETF development has helped products like AVUV grow and thrive, but that’s not the limit of active ETFs as a category. American Century Investments has also recently launched a pair of ETFs that lean heavily on active ETFs as discrete building blocks for an overall portfolio. The American Century Small Cap Value Insights ETF (ACSV) and the American Century Small Cap Growth Insights ETF (ACSG) launched this past October. 

The funds, both asking 49 bps, offer bottom-up portfolio construction in value and growth views, respectively. The ETF duo targets small-cap firms, leaning on fundamental research to invest in those companies. That proprietary research helps find high quality firms meeting growth or value standards, selling investments when valuation targets are met or more appealing options appear. 

Combining those two ETFs, or adding one versus the other, gets that deep active investing focus while also offering the flexibility of the ETF wrapper’s easy tradability. Such funds can build upon a strategy like AVUV as a more core allocation, for example. Active ETFs have evolved to offer funds meeting all kinds of risk tolerances and portfolio goals. The AVUV, ACSV, and ACSGs of the world are just a few examples of how the category continues to grow to meet client needs.

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