We believe the flexible nature of active ETFs makes them a highly effective tool for gaining exposure to diverse markets, particularly those where structural inefficiencies necessitate disciplined risk management and careful security selection. By merging active management with the inherent advantages of the ETF structure, these funds have seen a surge in investor expected in fixed income, private assets, and derivative-income ETFs.
Fixed income opportunities
In our view, active ETFs are a natural choice for fixed income investors, as they assist in navigating structural market inefficiencies and managing risks related to interest-rate fluctuations and issuer creditworthiness. These advantages have fueled significant demand recently, with active fixed income ETFs now representing 41% of total inflows into US-listed fixed income ETFs. Looking ahead, we see compelling opportunities in fixed income from both fundamental and technical perspectives, and we believe the current risk landscape favors the dynamic strategy and rigorous bottom-up security selection offered by active ETFs. We anticipate income potential within less accessible segments of the fixed income market, such as emerging market debt and high yield. Anticipated central bank rate cuts in the US and abroad over the coming year should provide a tailwind for fixed income, including front-end US Treasuries and investment-grade credit. Across these sectors, we believe the transparency and liquidity of active ETFs empower investors to manage their fixed income allocations with greater agility.
