The emergence of actively managed ETFs has been among this year’s most exciting and defining developments.

The pace of newly launched active ETFs in 2021 is outdueling index ETFs. Over 200 active ETFs have been launched this year. In September alone, almost half of new ETF launches on the New York Stock Exchange were active ETFs.

Even though index-linked ETFs still rule the roost by assets managed, active ETFs are making impressive strides. Let’s examine contributing factors driving this trend.

Head-Turning Performance
Hot performance is usually the first thing to get investors’ attention. And the active ETF marketplace has experienced its share of dazzling performance.

The Amplify Transformational Data Sharing ETF (BLOK) has jumped over 70% year-to-date compared to a gain of 25.27% for the Schwab U.S. Broad Market ETF (SCHB). The bulk of BLOK’s holdings are companies that are involved in the development and utilization of blockchain technologies.

Surging prices for major cryptocurrencies have boosted BLOK’s bottom line. Bitcoin and ethereum are ahead by 291.46% and 975.60%, respectively, during the past year.

BLOK’s holdings include Silvergate Bank, Galaxy Digital and Coinbase. The actively managed fund holds 49 stocks and charges annual expenses of 0.71%.

Rebounding Industry Sectors
A rebound in industries tied to commodities has been extremely beneficial to actively managed funds targeting the group.

The USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI) is an active fund comprising 14 commodity futures contracts from a universe of 27 eligible commodities futures. The 14 screened contracts are assigned an equal weighting spread across key sectors like industrial and precious metals, petroleum, grains and agriculture.

Since the start of the year, SDCI has jumped 34.46% as rising commodity prices push inflationary fears up. The fund rebalances positions monthly and uses a simplified tax reporting strategy by eliminating K-1 tax reports.

Favorable Regulatory Climate
Another major development for active management is regulatory changes, which have made launching active ETFs more accommodating.

On September 24, the Securities and Exchange Commission approved an NYSE Arca rule change that allows for the creation and redemption of shares in return for custom baskets of securities consistent with a fund’s exemptive relief.

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