Despite accounting for just 4% of ETF assets at the end of the first quarter of 2022, actively managed ETFs attracted 11% of net inflows in the first three months of the year. An equally strong but diverse presence in active asset management was also represented on stage at Exchange: an ETF experience.
Speakers included Holly Framsted, whose firm Capital Group launched a suite of core active ETFs such as the Capital Group Growth ETF (CGGR) in February to a sequel that already had more than $700 million in assets; Hamilton Reiner of JPMorgan, which manages the JPMorgan Equity Premium Income ETF (JEPI), which launched in May 2020 and held over $8 billion in assets; and Fidelity’s Greg Friedman, who took well-established mutual fund strategies and made them available to ETF-focused advisors with funds like the Fidelity Blue Chip Growth (FCBG).
However, two sessions that stood out to me were those with Brett Winton of ARK Invest and Chris Davis of Davis Advisors. Not only did I have the pleasure of interviewing them, but they take completely different approaches.
Winton is Director of Research at ARK Invest, the company behind ETFs focused and active on disruptive technologies, such as ARK Innovation ETF (ARKK) and the ARK Next Generation Internet ETF (ARKW). His colleague Cathie Wood was also a speaker at the conference. Wood was encouraged by interviewer Bob Pisani to respond to Morningstar’s recently written negative comment that cited a lack of depth from the team that runs ARK’s ETFs as well as why ARKK has become more concentrate.
That’s why Winton’s appearance was so compelling, as he was able to address ARK’s research process and also allay investor concerns that Wood was leading a one-woman group.
“Our research is a combination of top-down and bottom-up research. Oftentimes analysts start and plot a complex curve of cost decline using Wright’s law to understand how costs are declining,” Winton told the spectators. “Then they turn around and make unit economic cases; that is, what is the marginal buyer of this technology going to buy, and what is he going to get? And can I name different industries and different types of customers that fit into our expectations for the overall size of technology.
ARKK’s largest holdings include Coinbase (COIN), Unity Software (U) and Zoom Video Communications (ZM).
Meanwhile, Davis is not just the CEO of Davis Advisors, but an active equity ETF portfolio manager, the Davis Select US Equity ETF (DUSA) and the Davis Select Financial (DFNL).
I asked him to describe his company’s investment approach. “What would people have liked to be doing today, five years ago?” Davis told the Exchange. spectators. “So we created categories that were so unpopular. Think of a focused American value approach. True asset, totally different from indices, no momentum strategy. Just deep value with huge sustainable cash-generating activities.
Both DUSA and DFNL have stakes in Berkshire Hathaway (BKR.B), Capital One Financial (COF) and Wells Fargo (WFC), which is the polar opposite of the investment world compared to what the found in ARK ETFs.
The actively managed tent is expected to continue to grow with companies such as Matthews Asia and Morgan Stanley among the companies expected to offer new products ahead of the Exchange ETF conference in February 2023. But as showcased at this year’s conference , many ETF strategies are very different from each other.
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