Actively managed ETFs are an attractive way to combine the benefits of exchange-traded funds with the potential for above-benchmark returns through active management.
For years, exchange-traded funds (ETFs) have sought to offer investors a range of benefits including cost efficiency, transparency into holdings, liquidity and the potential for tax efficiency.
Actively managed ETFs combine these potential benefits with professional money management, targeting above-benchmark returns or pursuing specific investment objectives through active management.
To be sure, passive ETFs gained in popularity in recent years as investors flocked to low-cost strategies and markets generally posted strong returns. But passive strategies generally forgo alpha potential—the potential for returns above the benchmark—and may leave investors more vulnerable in periods of market volatility.
Active management can provide flexibility, allowing managers to selectively avoid or emphasize market segments depending on their mandate. Within a global equity mandate, for example, skilled active managers can apply their insights across regions, including both U.S. and non-U.S. markets, seeking to produce incremental returns as markets move in and out of favor.
Active management may also be valuable in niche market segments that require specialized market knowledge. Discerning active managers have higher potential to be rewarded in areas such as U.S. small cap and emerging markets that typically have less research coverage than U.S. large cap stocks. Plus, these segments tend to possess higher individual stock volatility, which can offer greater reward potential for managers who are skilled at picking winners or avoiding losers.
This Is How We Do It
Russell Investments ETFs bring our active multi-manager approach to investors in a convenient ETF package.
Tapping into our deep knowledge of the markets, rigorous manager research process and open architecture approach, these ETFs seek to offer investors a flexible and relatively cost-effective way to pursue their investment goals.
Moreover, these products benefit from our global footprint, experience and scale, which give us a front-row seat to the issues and themes affecting different asset classes. Our investment process and discipline are designed to be alert to opportunities and, when necessary, reposition as markets evolve.
True Believers
Our portfolio construction process is informed by our manager research team, who continually seek high-conviction manager candidates. Each manager strategy is chosen to serve a specific purpose and is assessed through the lenses of people, process, portfolio and performance to determine the likelihood of success.
We focus on specialist managers that operate in niche markets or use distinct strategies that we believe can add value to the portfolio. Our process is designed to look for complementary sources of excess return across multiple dimensions such as style, capitalization size or specialization in unique areas such as biotechnology. Gaining access to these unique opportunities requires deep industry relationships and a true commitment to open architecture—both fundamental to our approach.
Russell Investments’ portfolio managers combine strategies to determine each fund’s desired lineup, actively managing target weights and positioning based on our capital markets outlook. As market conditions change, we may modify manager lineups and allocations to seek to better position the fund for the anticipated market environment.
The Upshot
Our active ETFs offer flexibility for a range of investments. They will be used in our active-passive model portfolios but can also play key roles in a customized portfolio or as standalone investments. Ultimately, by combining multi-manager strategies with the benefits of ETFs, Russell Investments offers a sophisticated yet accessible option for investors.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information can be obtained by calling 800-787-7354 or by visiting russellinvestments.com. Please read a prospectus carefully before investing.