The active and passive ETF divide has become more and more important in the investing landscape. With ETFs slowly but surely eating away at mutual funds’ popularity, save for retirement funds, the cleavage between active and passive strategies has taken on a bigger role. Amid that split, however, issuer Envestnet has crafted a suite of ETFs to bridge the gap. Its hybrid active passive ETF roster stands out if only for its relative uniqueness.
See more: Going Deep on Active ETF Leader TCAF
The lead strategy, the ActivePassive U.S. Equity ETF (APUE) has picked up significant investor interest in its short operating period. The hybrid active passive ETF has nearly hit $1.5 billion since launching last May. Intriguingly, much of that has been via flows, with nearly $600 million coming in just last month. So how does it invest?
As it says on the tin, it looks to blend active and passive approaches. For its active side, it invests between 15% and 65% in active management. That portion will apply to small-caps. The rest of the strategy, then, would invest in large-caps with a passive approach.
That offers some real merits to curious investors. For one, many investors still want an allocation to large-caps given how much they’ve led the way for markets. Its managers apply strategic beta investing where needed by adjusting for factors like value, momentum, and quality.
The exposure to large-caps in a passive way gives a nice floor, on which the active side can then look for outperformance. Active can play an especially valuable role in the small-cap space. Given how much less information is available in small-caps relative to larger firms, active managers’ experience can help find outperformance.
APUE has returned 26.4% since inception. For investors looking at a core equity exposure that has an active aspect, its 33 basis point fee may be a price worth paying.
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