By Fidelity Investments
Learn how these funds fit into modern portfolio construction.
Key Insights
- Active ETFs combine some of the most useful features of ETFs—liquidity, transparent fees, favorable tax treatment, and diversification—with active management.
- The wide range of investment approaches among active ETFs means that these funds can serve a variety of roles in a client portfolio, from achieving exposure to the broad market or a narrow market niche, to seeking income generation, to possibly acting as a defensive hedge.
- Active ETFs can be a useful tool in the portfolio construction tool kit during periods of market volatility.
Exchange-traded funds (ETFs) have steadily risen in prominence and assets since they were first developed in the early ’90s. They’ve won the favor of both Wall Street traders and Main Street financial advisors by allowing investors to obtain exposure to passive strategies in a low-fee wrapper. But if much of the utility of ETFs derives from passive index-tracking, is an active ETF just an oxymoron? Far from it. Active ETFs have some unique advantages—and they’re surging in popularity with investors and asset managers.
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