Healthcare innovation and biotechnology are standing out right now as areas with a lot of promise for investors. September's rate cut has brightened prospects, while R&D, boosted by AI, is driving new drug discoveries. Health and biotech ETFs and investing could make for a worthwhile consideration as equities uncertainty rises. Amid that interest, investors may want to consider how active investing can outperform passive biotech approaches to life sciences in some key ways. See more: Rising Active ETF TCAF ...

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Interest Rate Outlook - Fed Chair Jerome Powell expressed caution regarding lower interest rates, following a rate-cutting stance from two fellow Fed governors earlier in the week [2][3] - The federal funds rate has been relatively high, ranging from 3.13% to 5.38% between September 2022 and September 2024, as the Fed attempts to control inflation [4] Market Reaction - Stock prices fell, with the S&P 500 and Nasdaq Composite both declining by 0.3%, and the Dow Jones Industrial Average retreating by 0.4% [3] - Stock futures for major indices are slightly down ahead of the market open [5] Economic Indicators - Initial jobless claims for the week of September 20 are expected to rise to 235,000 from 231,000 in the prior week [6] - Existing home sales are projected to decrease to 3.96 million in August from 4.01 million in July [6] - Corporate earnings reports are anticipated, with Costco expected to report EPS of $5.81 for the August quarter, up from $5.29 in the prior year [6] and Accenture's consensus EPS estimate at $2.98, up from $2.66 [6] Company Earnings Expectations - CarMax is expected to report EPS of $1.03 for the August quarter, an increase from $0.85 in the same period last year [7]

Group 1 - Active ETFs have gained significant traction among both retail and institutional investors, with technology being a particularly promising area for active investing [1] - The Goldman Sachs Future Tech Leaders Equity ETF (GTEK) charges a fee of 0.75% and focuses on high-conviction investments in emerging tech companies that are expected to drive global innovation [2] - GTEK has achieved a year-to-date return of 19%, outperforming the Vanguard Information Technology Index Fund (VGT), which returned 15.9%, as well as the ETF Database Category and FactSet Segment averages of 18.1% and 16.5% respectively [3] Group 2 - GTEK's portfolio includes companies like Cadence Design Systems (CDNS), which has returned 18% year-to-date and boasts a return on equity of 21.7%, focusing on integrated circuits and electronic devices [3] - Another significant holding is Snowflake, Inc. (SNOW), which has delivered a remarkable 45.4% return year-to-date, specializing in cloud data warehousing and data analysis software [3] - The concentrated investment strategy of GTEK may provide an attractive addition to existing portfolios, particularly in light of concentration risk in the tech sector [3]

Core Viewpoint - The Federal Reserve's potential decision to cut interest rates presents an opportunity for investors to reassess their fixed income allocations, emphasizing the advantages of active investing over passive bond index strategies [1][2]. Group 1: Active vs. Passive Investing - Active investing is positioned as a superior strategy in the current fixed income landscape, allowing investors to better navigate changes in interest rates and bond market dynamics [2][5]. - Passive bond index strategies may struggle to maintain their allocations effectively, particularly when bonds are called early, leading to potential underperformance [2][3]. Group 2: Performance Insights - Active managers can leverage fundamental research and insights to outperform bond index performance, especially in high-yield segments where deeper scrutiny of issuers is crucial [3][4]. - T. Rowe Price's active bond ETF, TAGG, has demonstrated a performance advantage, outpacing the Bloomberg Aggregate Bond Index by over 30 basis points on average over the last three years, after accounting for fees [4]. Group 3: Long-term Benefits - In the long term, active investing strategies can enhance bond portfolio performance, making them appealing for investors looking to adapt to changing interest rates or seeking better returns from debt [5].

Core Insights - The pursuit of "alpha" in public markets is diminishing, with active investors struggling to outperform benchmarks like the S&P 500 [1][2] - The landscape of IPOs has shifted significantly, with companies going public at an older median age, reducing opportunities for early-stage investment [3][4][5] - Market concentration is at an all-time high, with a small number of stocks driving the majority of market performance [6][7][8] - Passive investment strategies are outperforming active management, with a significant percentage of active funds failing to beat the S&P 500 [9][10][11] - The current market dynamics suggest that without a resurgence of younger companies going public or a cooling of AI hype, the trend of diminishing alpha will likely continue [12] IPO Trends - The median age of companies going public has increased from five years in 1999 to 14 years today, indicating a trend of startups remaining private longer [3][4] - This shift is attributed to ample venture capital and a desire to avoid regulatory scrutiny associated with public trading [4] Market Concentration - Stocks with a weight of 3% or greater in the S&P 500 now account for 35% of the total market cap, a concentration level reminiscent of the dot-com era [6] - The "Magnificent 7" tech companies are primarily responsible for earnings growth and capital expenditure within the index [7] Performance of Active vs. Passive Funds - A staggering 88.29% of large-cap active funds underperformed the S&P 500 over the last 15 years, with similar underperformance rates over shorter time frames [9] - In the most recent year, nearly 75% of large-cap funds failed to beat the benchmark, highlighting the challenges faced by active managers [10] Future Outlook - The current market environment presents fewer inefficiencies for active investors to exploit, with the dominance of passive strategies likely to persist unless significant changes occur in the IPO landscape or market dynamics [12]

And welcome back to halftime with your we have your ETF edge. We're seeing two big pushes in the industry this week getting very different receptions. Let's jump right into it.Joining me now is independent ETF expert Dave Natig. Dave, thanks for joining us. Thanks for having me.All right, let's start off first. I get back to those two big players diving into the active management arena. We got billionaire investor Ron Baron launching his own fund and lowcost king Vanguard filing for a new fundamentals fund ...

Financial Data and Key Metrics Changes - The company reported adjusted diluted EPS of $0.90, representing a 6% increase compared to the same period a year ago [28] - Assets under management (AUM) increased by 23% to $457.3 billion, marking the highest quarterly AUM ever [8][50] - Adjusted revenue increased by 2% compared to the prior quarter and 9% compared to the prior year, primarily due to higher management fees on increased average AUM [23] Business Line Data and Key Metrics Changes - The company saw net inflows of $46.7 billion for the quarter, including $46.5 billion from Guardian's general account [14] - Fixed income net inflows were $49.7 billion, significantly up from $5.6 billion in the prior quarter [20] - Active fixed income ETFs delivered net inflows of $1 billion, with four ETFs each having at least $100 million of net inflows [21] Market Data and Key Metrics Changes - Net flows were positive in the U.S. for the eighth consecutive quarter, while EMEA, LatAm, and Asia Pacific experienced net outflows [16] - Institutional net inflows were $49 billion, marking the third consecutive quarter of positive flows [18] - The U.S. intermediary channel saw positive net flows despite a challenging flow environment [17] Company Strategy and Development Direction - The company is focused on three strategic pillars: protect and grow core businesses, amplify strengths, and diversify where clients give the right to win [32] - The partnership with Guardian is expected to amplify the company's insurance, institutional, and fixed income businesses [36] - The company aims to enhance client relationships by evolving from transactional to peer-to-peer partnerships [40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stabilization of business trends despite recent market volatility [5] - The company is committed to delivering superior financial outcomes for clients and maintaining a strong balance sheet for future investments [50] - Management acknowledged the challenges in the retail equity business but remains confident in the equities franchise [60] Other Important Information - The company completed a strategic partnership with Guardian, which includes a commitment of up to $400 million in seed capital for product innovation [7] - The company has maintained a healthy quarterly dividend and has reduced shares outstanding by over 22% since 2018 [30] - The adjusted operating margin for the second quarter was 33.5% [28] Q&A Session Summary Question: What are the next priorities on the institutional side? - Management is pleased with the three consecutive quarters of institutional net flows and sees potential for continued growth, particularly with the Guardian partnership [54] Question: How do you see the solution to persistent outflows in retail equity business? - Management believes in the equities franchise and is focused on protecting and growing core businesses, emphasizing the importance of delivering outstanding investment performance [60] Question: Can you speak on the addressable market for the JAAD ECL product? - Management highlighted the successful launch of the JABS ETF, which addresses client needs for short-duration, high-quality fixed-rate securitized assets [70] Question: What is driving the strong improvement in investment performance? - The improvement is attributed to strong performance in U.S. and global equity products, with at least 72% of AUM ahead of benchmarks across all time periods [72] Question: What are the opportunities in the multi-asset space? - Management sees potential in the balanced fund and is optimistic about growing interest in multi-asset solutions, particularly in the U.S., Europe, and Asia [80]

Active vs Passive Fund Performance - Actively-managed investment funds have historically struggled to consistently outperform their passive counterparts [1] - The outperformance of US markets in previous years has further intensified this challenge [1] - In 2025, active investment strategies are showing potential signs of resurgence amidst the "Great Rotation" [1]