Investing Ideas

Building modern multi-asset class portfolios with active ETFs

The surging popularity of active ETFs has broadened the range of strategies accessible via the vehicle and created new possibilities for the role ETFs can play in portfolios.

By: Darby Nielson Ryan McKee Jeannie Chun Nicolas Brunetti

Updated: 11/15/2024

Key Takeaways

Active ETFs seek different sources of return than index ETFs, but offer the same vehicle benefits.
A wide variety of strategies for outperformance fall within the active ETF category, including quantitative and hybrid strategies, not just those driven by fundamental security selection.
This variety of approaches offers varying levels of benchmark relative risk; the type of strategy you select and how you allocate your portfolio's risk budget can impact your potential for excess return.
Active strategies may also allow investors to achieve objectives other than outperformance, such as increased diversification, higher income, or reduced volatility and/or drawdowns.

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Building modern multi-asset class portfolios with active ETFs

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Diversification does not ensure a profit or guarantee against a loss.

ETFs are subject to market fluctuation and the risks of their underlying investments. ETFs are subject to management fees and other expenses.

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