Exchange-traded funds (ETFs) have been popular global investment instrument over the past 30 years.
As the name suggests, ETFs are pooled investment securities that can be bought or sold through a brokerage or an exchange, as is the case for do-it-yourself investors.
They are akin to mutual funds but with superior advantages. They are more tax-efficient and offer trading flexibility while providing portfolio diversification and risk management.
The ETF industry was predominantly perceived as synonymous with plain vanilla index investing until 2008. However, active management has garnered traction in recent years.
Passive ETFs
Passive ETFs are long-term investments that track the performance of an underlying index, sector, or asset class.
As a result, they have a lower expense ratio and lower trading costs because investors do not need to adjust their portfolios frequently.
They are a stable way for investors to quickly achieve their desired risk profile with the index or sector of their choice.
Passive ETFs replicate the holdings of the underlying index – based on clear and sound principles.
Compared to investments such as active ETFs and mutual funds, passive ETFs generate less capital gains distribution, have a lower portfolio turnover and tend to use in-kind redemptions to avoid selling securities at a gain.
Passive ETFs are less flexible because investors cannot make custom changes to their portfolio or adopt defensive strategies if market risk intensifies. This makes it challenging to capture lucrative opportunities or adopt protective measures during a market downturn.
Active ETFs
Instead of tracking an index, it aims to outperform a benchmark by virtue of active selection and management of constituent securities.
Implementing discretionary strategies that modify exposure to asset classes based on the ever-evolving macroeconomic conditions has enabled asset managers to capitalise on market inefficiencies and mispriced securities to deliver higher returns over time.
On average, active ETFs have a higher annual expense ratio of 0.57 per cent relative to an average of 0.26 per cent for passive ETFs.
This is directed towards conducting comprehensive research and due diligence to generate higher risk-adjusted returns and perform active risk management.
Active ETF managers are bound by law to provide daily disclosures to investors.
While this ensures higher transparency, it hinders an active manager’s ability to adjust holdings and implement investment strategies, some of which could be proprietary, without the risk of giving away their edge to competitors and other traders in the market.
Active ETFs do not necessarily outperform their passively managed counterparts or the underlying index by default. A large portion of the outperformance is dependent on the skill of the asset manager in question.
Active ETFs do not necessarily yield higher returns than their passively managed counterparts by default
Vijay Valecha,
chief investment officer at Century Financial
They are gaining in popularity among investors, particularly in volatile and uncertain market conditions such as those that prevailed for a significant part of 2022.
In such instances, some investors might be inclined to trust a qualified professional with a proven track record to manage their investments for a fee rather than managing risk themselves.
This grants investors access to sophisticated research and trading strategies that may give them an edge over passive investors.
ETF inflows surged to $40 billion in January 2023 alone – nearly double that month’s historical average.
Analysts are projecting active ETFs to gain traction and deliver outsized growth in 2023.
Nevertheless, active ETFs do not necessarily yield higher returns than their passively managed counterparts by default.
This is evident from the mixed performance of dollar-denominated ETFs over the past five years.
For instance, active ETFs fared better in the fixed-income and value equity categories, while passive ETFs emerged victorious over their functional counterparts in specific classes like large-cap and growth equities.
Nevertheless, 31 per cent of actively managed ETFs have outperformed the market so far this year. By comparison, 58 per cent of active ETFs outperformed the market in 2022.
Vijay Valecha is the chief investment officer at Century Financial
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UAE currency: the story behind the money in your pockets
The%20specs
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THE%20SPECS
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Company%20profile
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Results
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The Details
Article 15
Produced by: Carnival Cinemas, Zee Studios
Directed by: Anubhav Sinha
Starring: Ayushmann Khurrana, Kumud Mishra, Manoj Pahwa, Sayani Gupta, Zeeshan Ayyub
Our rating: 4/5
Sun jukebox
Rufus Thomas, Bear Cat (The Answer to Hound Dog) (1953)
This rip-off of Leiber/Stoller’s early rock stomper brought a lawsuit against Phillips and necessitated Presley’s premature sale to RCA.
Elvis Presley, Mystery Train (1955)
The B-side of Presley’s final single for Sun bops with a drummer-less groove.
Johnny Cash and the Tennessee Two, Folsom Prison Blues (1955)
Originally recorded for Sun, Cash’s signature tune was performed for inmates of the titular prison 13 years later.
Carl Perkins, Blue Suede Shoes (1956)
Within a month of Sun’s February release Elvis had his version out on RCA.
Roy Orbison, Ooby Dooby (1956)
An essential piece of irreverent juvenilia from Orbison.
Jerry Lee Lewis, Great Balls of Fire (1957)
Lee’s trademark anthem is one of the era’s best-remembered – and best-selling – songs.
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
more from Janine di Giovanni
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Killing of Qassem Suleimani
Killing of Qassem Suleimani
More from Neighbourhood Watch:
Global state-owned investor ranking by size
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United States
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China
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UAE
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Japan
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5
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Norway
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
KILLING OF QASSEM SULEIMANI
Killing of Qassem Suleimani
if you go
Getting there
Etihad (Etihad.com), Emirates (emirates.com) and Air France (www.airfrance.com) fly to Paris’ Charles de Gaulle Airport, from Abu Dhabi and Dubai respectively. Return flights cost from around Dh3,785. It takes about 40 minutes to get from Paris to Compiègne by train, with return tickets costing €19. The Glade of the Armistice is 6.6km east of the railway station.
Staying there
On a handsome, tree-lined street near the Chateau’s park, La Parenthèse du Rond Royal (laparenthesedurondroyal.com) offers spacious b&b accommodation with thoughtful design touches. Lots of natural woods, old fashioned travelling trunks as decoration and multi-nozzle showers are part of the look, while there are free bikes for those who want to cycle to the glade. Prices start at €120 a night.
More information: musee-armistice-14-18.fr ; compiegne-tourisme.fr; uk.france.fr
RECORD%20BREAKER
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Company%20Profile
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'Panga'
Directed by Ashwiny Iyer Tiwari
Starring Kangana Ranaut, Richa Chadha, Jassie Gill, Yagya Bhasin, Neena Gupta
Rating: 3.5/5
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
COMPANY%20PROFILE
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Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
Afghanistan fixtures
- v Australia, today
- v Sri Lanka, Tuesday
- v New Zealand, Saturday,
- v South Africa, June 15
- v England, June 18
- v India, June 22
- v Bangladesh, June 24
- v Pakistan, June 29
- v West Indies, July 4
Results
2.30pm: Dubai Creek Tower – Handicap (PA) Dh40,000 (Dirt) 1,200m; Winner: Marmara Xm, Gary Sanchez (jockey), Abdelkhir Adam (trainer)
3pm: Al Yasmeen – Maiden (PA) Dh40,000 (D) 1,700m; Winner: AS Hajez, Jesus Rosales, Khalifa Al Neyadi
3.30pm: Al Ferdous – Maiden (PA) Dh40,000 (D) 1,700m; Winner: Soukainah, Sebastien Martino, Jean-Claude Pecout
4pm: The Crown Prince Of Sharjah – Prestige (PA) Dh200,000 (D) 1,200m; Winner: AF Thayer, Ray Dawson, Ernst Oertel
4.30pm: Sheikh Ahmed bin Rashid Al Maktoum Cup – Handicap (TB) Dh200,000 (D) 2,000m; Winner: George Villiers, Antonio Fresu, Bhupat Seemar
5pm: Palma Spring – Handicap (PA) Dh40,000 (D) 2,000m; Winner: Es Abu Mousa, Antonio Fresu, Abubakar Daud
The specs
Common to all models unless otherwise stated
Engine: 4-cylinder 2-litre T-GDi
0-100kph: 5.3 seconds (Elantra); 5.5 seconds (Kona); 6.1 seconds (Veloster)
Power: 276hp
Torque: 392Nm
Transmission: 6-Speed Manual/ 8-Speed Dual Clutch FWD
Price: TBC
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
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Destroyer
Director: Karyn Kusama
Cast: Nicole Kidman, Toby Kebbell, Sebastian Stan
Rating: 3/5
UAE release: January 31
UAE currency: the story behind the money in your pockets
MATCH INFO
Uefa Champions League, last-16, second leg (first-leg scores in brackets):
PSG (2) v Manchester United (0)
Midnight (Thursday), BeIN Sports
Manchester City 4
Otamendi (52) Sterling (59) Stones (67) Brahim Diaz (81)
Real Madrid 1
Oscar (90)
Frida%20
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The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Brief scoreline:
Manchester United 2
Rashford 28', Martial 72'
Watford 1
Doucoure 90'
WRESTLING HIGHLIGHTS
Green ambitions
- Trees: 1,500 to be planted, replacing 300 felled ones, with veteran oaks protected
- Lake: Brown's centrepiece to be cleaned of silt that makes it as shallow as 2.5cm
- Biodiversity: Bat cave to be added and habitats designed for kingfishers and little grebes
- Flood risk: Longer grass, deeper lake, restored ponds and absorbent paths all meant to siphon off water
Liverpool’s fixtures until end of 2019
Saturday, November 30, Brighton (h)
Wednesday, December 4, Everton (h)
Saturday, December 7, Bournemouth (a)
Tuesday, December 10, Salzburg (a) CL
Saturday, December 14, Watford (h)
Tuesday, December 17, Aston Villa (a) League Cup
Wednesday, December 18, Club World Cup in Qatar
Saturday, December 21, Club World Cup in Qatar
Thursday, December 26, Leicester (a)
Sunday, December 29, Wolves (h)
Naga
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
UAE currency: the story behind the money in your pockets
Abaya trends
The utilitarian robe held dear by Arab women is undergoing a change that reveals it as an elegant and graceful garment available in a range of colours and fabrics, while retaining its traditional appeal.
Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
Dengue%20fever%20symptoms
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