Active investing has taken a big leap over the last few years, with active ETFs a popular alternative to mutual funds for many investors. Both active equities and active fixed income ETFs have gathered significant attention. Active fixed income ETFs, specifically, have taken a big leap this year compared to equities, per new research from JP Morgan. That could owe to some particular advantages inherent to active fixed income ETFs.
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According to JP Morgan research, active fixed income funds have seen their inflows more than double since 2019. That year, active fixed income ETFs saw 15% of total active ETF inflows. On a YTD basis this year, that number has grown to 32%, mainly at the expense of active equity ETFs. Whether that gap comes from many investors already moving out of equity mutual funds or from a spike in fixed income mutual funds moving to ETFs, it’s clear actively managed fixed income ETFs made a jump.
Funds that invest in fixed income actively provide some real advantages over mutual funds, which could help draw mutual fund investors out of that wrapper. ETFs provide greater transparency and tax efficiency, which could matter quite a bit, especially for investors nearing retirement.