As the market keeps stretching to new all-time highs, investors must be wondering when the eventual bear market will occur. When you know you’re in the midst of a recession it makes the urgency even stronger. This may be a good time to consider actively managed ETFs as a means of trying to outperform the overall market in the coming months or longer.
Actively managed ETFs are an exchange traded product that has similar active management that mutual funds traditionally offer. While most ETFs are simply indexed to a benchmark, these funds offer the advantages of an exchange traded product with the potential of active management. While the track record of active management in recent years has led investors to passively managed funds with lower costs, this may be a point in time where they may earn the higher fees they collect.
The following are 10 actively managed ETFs for discriminating buy and hold investors that will provide a level of diversification and opportunity.
Actively Managed ETF #1: DORSEY WRIGHT ADR ETF (NYSEARCA: AADR)
The fund seeks to outperform the MSCI EAFE Index and the BNY Mellon Classic ADR Index as a benchmark. The managers utilize a technical, systemically-driven investment approach that incorporates relative strength analysis.
Actively Managed ETF #2: Invesco S&P 500 Downside Hedged Portfolio (NYSEARCA: PHDG)
This fund seeks to make money in both a rising and falling market. They incorporate a quantitative, rules-based strategy that is designed to exceed the S&P 500 Dynamic VEQTOR Index as a benchmark. The intent is to achieve their returns while not being directly correlated to the broad equity or fixed income markets.
Actively Managed ETF #3: First Trust North American Energy Infrastructure ETF (NYSEARCA: EMLP)
The objective of this fund is to achieve total return through investing in energy infrastructure. Under normal market conditions, the fund will invest at least 80% of the fund’s assets in equity securities of companies headquartered in the U.S. The primary investment is in master limited partnerships (MLPs).
Actively Managed ETF #4: AdvisorShares Global Echo ETF (BATS: TAIL)
This fund seeks to mitigate significant downside risk by investing in a portfolio of out-of-the-money put options purchased on the U.S. stock market. While a portion of the portfolio is invested in options, the bulk of the portfolio is invested in U.S. Treasuries.
Actively Managed ETF #5: High Yield ETF (NYSEARCA: HYLD)
The primary goal of this fund is to generate income with a secondary objective of capital appreciation. The fund focuses on smaller issuers that carries less competition and generous risk-adjusted yields. Apart from the fundamentals of the issuer, the fund seeks to incorporate macroeconomic and business cycle analysis.
Actively Managed ETF #6: WisdomTree Emerging Market Local Debt Fund (NYSEARCA: ELD)
This fund seeks to attain high levels of total returns through income and capital appreciation. The investment objective is achieved through investing in local debt denominated in a foreign currency.
Actively Managed ETF #7: Star Global Buy-Write ETF (NYSEARCA: VEGA)
This fund is a low volatility, moderate risk, global balanced portfolio that utilizes covered call options as a means of generating income. The fund sells calls on a portion, typically 50 to 75%, of the underlying holdings. The fund also utilizes bond interest income and dividends to increase the income of the fund.
Actively Managed ETF #8: SPDR SSGA Global Allocation ETF (NYSEARCA: GAL)
This fund primarily seeks capital appreciation and may invest in certain ETFs. The company invests at least 30% in securities from issuers economically tied to a country other than the U.S. The assets of the fund has to maintain at least 60% of its assets invested in equities.
Actively Managed ETF #9: ARK Innovation ETF (NYSEARCA: ARKK)
This fund seeks to identify companies that benefit from the development of new products or services. The advancement could be a technological improvement or an advancement in scientific research related to DNA research, industrial innovation in energy, automation and manufacturing. The company has a minimum investment requirement of 65%.
Actively Managed ETF #10: ClearBridge Large Cap Growth ESG Portfolios (NYSEARCA:LRGE)
This fund actively incorporates environmental, social and governance (ESG) factors to find companies that provides consistent growth while managing volatility. The benchmark for the fund is to outperform the Russell 1000 index in both advancing and declining markets. The fund uses secular tailwinds that the company expects to provide a multi-year holding period.