The market for actively-managed ETFs has grown from a cottage industry into one of the fastest-growing subsets of the ETF business. While thematic ETFs have drawn some attention, the rise of semi-transparent ETFs (ANTs) and SEC Rule 6c-11 have pulled in a growing number of active managers from the $24 trillion mutual fund business.
Let’s take a look at today’s largest active ETF providers and where the industry is heading over the coming years.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
Dimensional Fund Advisors
Dimensional Fund Advisors launched its first ETF just over a year ago, but, since then, it has become the largest active ETF issuer with $45 billion in assets under management. More than 80% of these assets come from six mutual fund conversions into lower-cost, fully-transparent active ETFs, launched under the SEC’s new Rule 6c-11.
Some of the company’s mutual fund conversions include:
| Name | Converted From | AUM |
|---|---|---|
| Dimensional U.S. Equity ETF (DFUS) | Tax-Managed U.S. Equity Portfolio | $5.8 billion |
| Dimensional U.S. Small-Cap ETF (DFAS) | Tax-Managed U.S. Small Cap Portfolio | $4.1 billion |
| Dimensional U.S. Targeted Value ETF (DFAT) | Tax-Managed U.S. Targeted Value Portfolio | $6.5 billion |
| Dimensional U.S. Core Equity 2 ETF (DFAC) | T.A. U.S. Core Equity 2 Portfolio | $14.4 billion |
| Dimensional International Value ETF (DFIV) | Tax-Managed International Value Portfolio | $3.8 billion |
| Dimensional World ex-US Core Equity ETF (DFAX) | T.A. World ex-U.S. Core Equity Portfolio | $4.7 billion |
Data from Morningstar as of January 30, 2022.
Many financial advisors appreciate DFA’s long-term strategies that blend discipline with flexibility. In particular, the company’s funds focus on the belief that small companies outperform large companies, value companies outperform growth companies, and profitable companies outperform their less profitable counterparts.
In 2022, DFA plans to launch 10 more ETFs, including two U.S., four international, three emerging markets, and one U.S. real estate ETF.
ARK Funds
Cathy Woods’ ARK Innovation ETF (ARKK) is one of the best-known active ETFs, providing investors with exposure to disruptive innovations, including fintech, artificial intelligence, and the genomic revolution. While the tech sector’s downturn shaved its total assets under management, the fund still has about $16 billion in total assets.
ARK Funds also has a number of other +$1 billion active ETFs:
| Name | Ticker | AUM | Expense Ratio |
|---|---|---|---|
| ARK Next Generation Internet ETF | ARKW | $3.7 billion | 0.83% |
| ARK Genomic Revolution ETF | ARKG | $5 billion | 0.75% |
| ARK Autonomous Tech & Robotics ETF | ARKQ | $2.1 billion | 0.75% |
| ARK Fintech Innovation ETF | ARKF | $2.2 billion | 0.75% |
Data from Morningstar as of January 30, 2022.
American Century
American Century has built a diverse portfolio of about 30 semi-transparent active ETFs (ANTs) over the past few years, spanning U.S. equities, international equities, fixed income, and alternatives (e.g., preferred stock, real estate, convertible bonds). With six decades of active management experience in mutual funds, the new ETFs were a natural expansion.
Currently, most of these funds have total assets in the $100 million to $200 million range, but the issuer’s growing portfolio adds up to billions of dollars in total active ETF assets. In addition, American Century remains a popular brand among financial advisors, meaning that it could see growth as advisors shift from mutual funds to ETF assets.
T. Rowe Price
T. Rowe Price has a growing lineup of eight active ETFs, including the T. Rowe Price Blue Chip Growth ETF (TCHP) and the T. Rowe Price Dividend Growth ETF (TDVG). Like American Century, these funds have only $100 million to $200 million in assets under management, but the issuer’s brand recognition could go a long way in growing the portfolio over time.
Upcoming Active ETFs
JPMorgan Chase recently announced plans to convert four of its mutual funds into active ETFs later this year. The four mutual funds have a combined $8.7 billion in total assets under management, which could make JPMorgan a serious overnight competitor in the active ETF space, targeting fixed income, international equities, and realty income.
Franklin Templeton and Capital Group also have plans to convert existing mutual funds into active ETFs or launch active ETFs to complement their mutual funds. These moves could bring billions more dollars into the active ETF space and accelerate the transition from costly mutual funds to low-cost and tax-efficient ETFs over the coming years.
Don’t forget to explore our Dividend Guide where you can access all the relevant content and tools available on Dividend.com based on your unique requirements.
The Bottom Line
Dimensional Fund Advisors surpassed Cathy Woods’ ARK Funds to become the largest issuer of active ETFs. While active ETFs have been thematic in the past, future growth will come largely from successful active mutual funds converting to an ETF structure, making companies like American Century, T. Rowe Price, and Franklin Templeton future leaders.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
