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Active ETFs continue to gain momentum as investors seek opportunities for outperformance and daily management of portfolio risk. Growing adoption has been driven by tax efficiency, liquidity and transparency. These strategies combine the structural benefits of ETF investing with the potential to capture returns that align with individual investor goals.
An active ETF aims to outperform an index or target a specific outcome, rather than replicating an index. Active ETFs benefit from the accessibility, cost structure, and diversification potential of traditional ETFs while adding the flexibility of active management.
Active ETF portfolio managers make strategic decisions based on daily analysis of market conditions and opportunities. These investment professionals use research and market insights to navigate the changing investment landscape. They actively buy and sell securities in response to evolving trends and valuations, applying their expertise to help manage risk while seeking attractive returns.
Active ETFs can combine tax efficiency and intraday trading flexibility with the opportunity to outperform benchmarks. They offer investors transparency into holdings, broad diversification potential, competitive cost structures and accessibility for a wide range of investors.
An active ETF is an exchange-traded fund that is actively managed by investment professionals.
Active ETFs seek to outperform the market through active security selection and asset allocation, whereas passive ETFs aim to replicate the performance of a specific index or benchmark.
An active ETF is an exchange-traded fund that is actively managed by investment professionals.
Active ETFs seek to outperform the market through active security selection and asset allocation, whereas passive ETFs aim to replicate the performance of a specific index or benchmark.
Active ETFs are managed by skilled portfolio managers who analyze market trends, conduct research and make investment decisions aiming to achieve the funds investment objectives. Portfolio managers actively buy and sell securities based on their assessment of market conditions and individual security prospects.
Active ETFs leverage the same ecosystem of institutional liquidity providers as passive ETFs. These liquidity providers utilize powerful technology to enhance price discovery and tradability in both active and passive ETFs. The actual trading of an active ETF is more similar to the trading of a passive ETF rather than an active mutual fund. The level of risk associated with each ETF trade depends on the underlying investments and the liquidity (frequency of trading) of the particular ETF not whether the ETF is passively or actively managed.
Active ETFs can be categorized by their investment strategies and asset classes.
They might invest in equities, bonds, other securities designed for income, real assets or a mix of assets that can provide a total portfolio solution. Some focus on specific sectors or geographic regions, while others apply thematic strategies, such as sustainable investing. Active ETFs can employ different investment styles, characteristics and risks.
Active ETFs may distribute income or capital to investors in the form of distributions, akin to dividends. However, these distributions are not guaranteed and are contingent upon the ETF's performance. Distributions are disbursed to investors similarly to dividends received from shares in a corporation, with variability based on the investment strategy and asset composition of the active ETF, ranging from monthly to annual payment frequencies. Investors should review the ETF's prospectus to learn more about a particular fund's distribution policy.
Active ETFs may have slightly higher expense ratios compared to passive ETFs due to the costs associated with active management. However, active ETFs generally have lower expense ratios when compared to actively managed mutual funds.
Traditional active ETFs are required to disclose portfolio holdings on a daily basis, providing investors with transparency regarding the fund's portfolio composition. This allows investors to assess the fund's holdings, sector allocations and individual securities.
Investing in active ETFs carries risks similar to investing in individual stocks or other actively managed funds. These risks include market volatility, economic downturns and the potential for underperformance compared to the market or the fund's objectives. Shares of ETFs are bought and sold at market price as opposed to net asset value. As a result, an investor may pay more than net asset value when buying and receive less than net asset value when selling.
The mechanics of active ETFs provide the potential for tax advantages to investors. The creation and redemption process of ETF shares allows for efficient management of capital gains.
ETF creation and redemption is the "in-kind" process where large financial institutions called Authorized Participants can either build and exchange a basket of the ETFs underlying stocks for new ETF shares, or swap ETF shares back for the underlying securities, aiming to keep the ETF price aligned with its underlying value.
Investors can buy and sell active ETFs through brokerage accounts, either online or through financial institutions, by placing buy or sell orders during market hours. The process is similar to buying or selling stocks, providing investors with a convenient and accessible way to invest in active strategies.
Past performance is no guarantee of future results. All investments carry a certain degree of risk, including the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that investment objectives will be achieved. See the applicable product literature for details.
Shares of ETFs are bought and sold at market price as opposed to net asset value. As a result, an investor may pay more than net asset value when buying and receive less than net asset value when selling. In addition, brokerage commissions will reduce returns. Fund shares are not individually redeemable directly with the Fund, but blocks of shares may be acquired from the Fund and tendered for redemption to the Fund by certain institutional investors in Creation Units.
Before investing, carefully consider fund investment objectives, risks, charges and expenses. For this and other information that should be read carefully, please request a prospectus or summary prospectus from your financial professional or Nuveen at 800.257.8787 or visit nuveen.com.
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