3 Active ETFs Making Big Moves in August

Key Points

• Actively managed ETFs now account for about 12% of total ETF assets, up sharply from 2020, as investors seek nimble strategies.
• The Capital Group Dividend Value ETF (CGDV) has gained 17% year to date by combining U.S. large-cap value stocks with limited international dividend exposure.
• The Franklin Systematic Style Premia ETF (FLSP) and SPDR SSgA Multi-Asset Real Return ETF (RLY) offer unique multi-asset strategies with notable yields but limited liquidity.

The shift toward actively managed exchange-traded funds (ETFs) is showing no signs of stopping, a signal that investors are increasingly willing to hand over control of their portfolios to fund managers that are not following an index-based approach. Certainly, passive index ETFs still dominate when it comes to total assets, but actively managed funds are drawing a disproportionate share of new assets and, as a result, may have some of the most exciting and promising strategies for investors to explore.

As the share of total ETF assets found in actively managed funds has surged to about 12% from less than a third of that in 2020, investors seem to be appreciating the intraday liquidity, tax efficiency, and easy access of actively managed funds, despite their not being tied to indices. This structure does allow for some standout performance among active funds as well, including across both traditional and unique strategies.

A Standard Value Dividend Play, But With a Couple of Twists

The Capital Group Dividend Value ETF NYSEARCA: CGDV follows a common approach—U.S. large-cap value stocks with the potential to provide high-yield dividends—but its active management allows it to be more nimble than passively managed alternatives with a similar strategy. With that said, CGDV remains fairly competitive on price, as its expense ratio is only 0.33%, which is low for an active fund.

Alongside active management, CGDV reserves up to 10% of its asset base for investments in dividend-paying stocks listed outside of the United States, another feature that sets this fund apart from many passive dividend ETFs. Across 57 holdings, CGDV balances major tech players against strong value plays in other sectors, with a particular emphasis on industrials and communications names.

The combination has yielded impressive results this year: CGDV is up 17% year to date (YTD) and about 4% in the last month alone. Its dividend yield is 1.14%—not the highest that investors will find, but a compelling add-on in addition to solid returns.

FLSP's Unique and Complex Approach May Be Building Momentum

Getting into more obscure strategies that are unique to actively managed funds but still capable of generating noteworthy returns, the Franklin Systematic Style Premia ETF NYSEARCA: FLSP has trended upward in the last six weeks.

FLSP uses a multi-asset long/short strategy that actually combines two distinct approaches. In the first, managers target companies based on value, momentum, and other factors to make both bullish and bearish investments across multiple asset classes. In the second, a different set of factors helps to determine long and short positions in both individual stocks and indices.

This "mini-hedge-fund" approach comes at a moderate price of 0.65% in annual fees, but investors should beware that FLSP has only about $1 billion in managed assets and fairly low trading volume as well, so it is far from the most liquid ETF available. The fund does provide a solid dividend yield of 2.51%, however, providing additional appeal for investors looking for passive income to complement a more active strategy.

Multiple Avenues to Protect Against Inflation With RLY

Another multi-asset fund with notable returns (more than 15% YTD and a consistent upward trend since early July) is the SPDR SSgA Multi-Asset Real Return ETF NYSEARCA: RLY. RLY beats FLSP on annual fees by levying an expense ratio 0.50%. Like FLSP, it aims for both capital appreciation and income, but it does so by building exposure to both domestic and international inflation-protected securities, real estate securities, commodities, and more. This is achieved primarily through a series of ETF holdings.

When it comes to dividends, RLY stands out on our list with a yield of 2.99%. Its inflation-hedging strategy involving defensive plays like commodities and real estate, as well as inflation-linked bonds, has paid off particularly well while inflation has remained persistent this year.

This makes RLY an appealing option for investors keen to protect themselves against inflation but unable or unwilling to construct and manage their own portfolios of similar investments. It does, however, mean that RLY is perhaps less appealing in environments in which inflation isn't rampant. RLY is therefore probably not a buy-and-hold option for most investors.

Although RLY's asset base and trading volume are both higher than FLSP's, it is still not the most liquid fund available. Nonetheless, its unique positioning in today's economic landscape may make it worthwhile for a particular type of investor seeking assistance in capital preservation with the help of a dedicated ETF.

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