Active ETFs are managed by professionals who actively select securities in a portfolio with the goal of outperforming a specific benchmark or achieving superior returns.
Unlike passive ETFs, which track a specific index, active ETFs rely on in-depth research, market analysis, and strategic decision-making by the fund managers to inform real-time investment decisions.
Targets Outperformance
Skilled fund managers, supported by in-depth research and analysis, seek to identify opportunities and navigate market conditions. Fund managers use their experience and expertise to make strategic decisions and adjust their portfolios in an attempt to best their benchmark index.
Intraday Liquidity
ETFs can be bought and sold at the live market price throughout the day, unlike mutual funds which are traded only once a day, at closing price. Market conditions can change from moment to moment, so for investors looking to act with haste, the intraday liquidity of ETFs can be essential.
Cost Benefits
There are potential cost benefits when opting for ETFs over mutual funds. Even if a mutual fund has lower fund charges, investors must bear the trading costs when units of the funds are bought or sold. This is because the mutual fund manager needs to adjust the portfolio as a result. But ETF trades do not affect the portfolio itself, meaning investors avoid this cost.
ETFs are for professional investors only. When you invest in ETFs, your capital is at risk.
ETFs offer intraday trading flexibility, allowing investors to buy and sell shares throughout the day—an advantage over mutual funds, which only trade at the end of the day. ETFs also provide daily transparency, disclosing all holdings for better portfolio insight. Compared to mutual funds, ETFs are simpler and more accessible, with straightforward fee structures and a single expense ratio.
Want to learn more about how they compare to mutual funds? Check out our latest comparison article here.
An active exchange-traded fund (ETF) is managed by professionals who actively select securities in the portfolio with the goal of outperforming a specific benchmark or achieving superior returns. Unlike passive ETFs, which track a specific index, active strategies rely on the expertise and research of fund managers to make investment decisions.
Expert fund managers use in-depth research, market analysis, and strategic decision-making to select and adjust an fund’s holdings. The managers monitor the market and make changes to the ETF’s composition based on their market outlook, economic conditions, and investment strategy to achieve their performance goals.
Benefits include professional management, the potential for superior returns, greater transparency, and intraday trading flexibility. They are often more cost-efficient compared to mutual funds due to lower transaction costs and simpler fee structures.
Active ETFs, especially those domiciled in Ireland, offer tax advantages over other types of funds. In Europe, when it comes to holding US equities, mutual funds are typically subject to a 30% withholding tax (WHT). By contrast, Irish-domiciled ETFs are only subject to a 15% WHT, giving them a tax advantage when it comes to holding U.S. equities.
To read the full tax advantages of ETFs, read our full article here.
Read our extensive list of FAQs on active management by clicking the button below.
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