Active ETFs Market Trends and Evaluation

This document is a research report that discusses the current landscape of Active Exchange Traded Funds (ETFs) in relation to passive strategies. It outlines the historical context of ETFs, noting that while they are predominantly associated with passive management, the share of Active ETFs has grown significantly from 0.35% in 2008 to 6.43% in 2023. The report details the reasons behind this growth, including operational changes and regulatory developments that have facilitated the introduction of Active ETFs. It explains the characteristics of Active ETFs, emphasizing their goal of outperforming benchmarks rather than merely tracking indexes. The document also addresses performance evaluation metrics for Active ETFs, contrasting them with passive ETFs, and discusses the importance of selecting appropriate benchmarks for assessing performance. Additionally, it considers the strategic versus tactical use of Active ETFs, suggesting that they are better suited for long-term investment strategies due to the nature of alpha generation.