Exchange-traded funds (ETFs) have traditionally been known for simplifying the investment process for non-professionals while keeping costs low through a passive management approach that tracks indices linked to different strategies. Oddly, though, actively managed ETFs—those not tied to any particular index but with portfolios curated by fund managers, causing them to generally have much higher fees—have grown at a faster pace than their passive peers. Goldman Sachs reports that inflows into active ETFs were about four times stronger than those for passive ETFs last year.
Active ETFs may have greater potential to capture alpha and may employ more complex, sophisticated investment strategies, both of which can appeal to more adventurous investors. Amid the flood of funds on the market today, two actively managed ETFs (and one that resembles an actively managed strategy) may stand out in particular.
CGDV Aims for Dividends and Price Appreciation Through an Active Approach
The aims for dividend income that exceeds the average yield on U.S. stocks, with a focus on large, established domestic firms and a secondary interest in large companies based outside of the United States. CGDV’s managers diversify the portfolio across many sectors and industries, although information technology, industrials, and healthcare stocks dominate.
With at least 90% of its equity assets invested in stocks with issuer ratings of investment grade or better, CGDV aims to be a stable, secure source of income even if the market is facing turbulence. Its actively managed approach means it has maximum flexibility to adjust holdings amid shifting conditions, which may appeal to investors seeking a defensive strategy that is nimble and responsive.
Investors will find in CGDV’s basket a group of just over 50 of the most solid dividend stocks, including names like Applied Materials Inc. and Microsoft Corp.
With an expense ratio of 0.33%, CGDV is costlier than some passive ETFs focused on dividends. However, its one-year return of nearly 21%, combined with a dividend yield of 1.31%, may outweigh that cost.
TCAF’s Core Equity Approach Combines Big Names With Lesser-Knowns
Using a core equity portfolio approach, the targets stocks using growth at a reasonable price (GARP) investing principles. The goal, then, is a combination of strong return possibilities and relatively lower risk compared to the broader market. TCAF’s managers are not restricted by market capitalization or other metric requirements, and instead attempt to identify individual companies to build a portfolio in a
Active ETFs Surge Past Passive, and These Are in the Lead
