The Most Popular Actively Managed ETFs of 2023

JPMorgan Equity Premium Income ETF (JEPI)

JEPI topped the list, having attracted over $26 billion in AUM since its debut in May 2020. After a stellar 2022 that only saw the ETF lose -3.54%, investors continue to flock to JEPI owing to a high 30-day SEC yield of 8.48% (previously in the double-digits) and monthly distributions.

JEPI combines active stock selection with a derivative income strategy. First, the ETF actively selects and manages a portfolio of stocks from the S&P 500 for favorable valuations and risk-adjusted characteristics among others. Then, the ETF employs equity-linked notes, or ELNS to provide exposure to an out-of-the-money covered call strategy.

The overall objective of JEPI is twofold: provide a higher-than-average yield paid monthly while targeting a lower volatility relative to the S&P 500 index. So far, it has achieved both of these goals, all the while sporting a very competitive 0.35% expense ratio.

JPMorgan Ultra-Short Income ETF (JPST)

One of the biggest losers throughout 2022 were long and intermediate duration bond ETFs. As interest rates rose at an aggressive, sustained pace, these ETFs suffered historically outsized drawdowns, nullifying their role as diversifiers and ballast in many investor portfolios.

The exception to this were short-duration bond ETFs, which were markedly less sensitive to rate hikes. A great example was JPST, which currently sits at $24 billion in AUM. This ETF primarily holds short-term, investment grade fixed- and floating-rate corporate bonds, while actively managing risk in the form of its credit quality and duration exposure.

By doing so, JPST manages to target a net yield-to-maturity 0f 5.53% as of June 22nd, 2023, while only possessing a duration of 0.76 years. Thanks to the current inverted yield curve, this ETF is paying out higher yields than longer duration ETFs with similar credit quality. JPST charges a 0.18% expense ratio.

Dimensional U.S. Core Equity 2 ETF (DFAC)

Known for their factor investing expertise, Dimensional Fund Advisors has long since managed a stellar lineup of mutual funds that for the most part was restricted to financial advisors. This changed in recent years as the firm launched more and more ETF counterparts, with a very popular one being DFAC.

With just over $26 billion in AUM, DFAC is one of the most popular actively managed factor ETFs on the market. This ETF is benchmarked to the Russell 3000 Index, while providing exposure to three factors: size, value, and profitability. Therefore, DFAC's portfolio skews towards stocks with smaller market cap, lower price to book, and higher profitability metrics. The ETF charges a 0.17% expense ratio.

Unfortunately, DFAC has underperformed its Russell 3000 Index benchmark since its inception in October 2007, returning 8.12% versus 8.55%. This points to a risk that all actively managed ETFs possess – the risk of underperforming an index benchmark after higher fees are factored in.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.