A Bumper Crop of Cheaper, More Transparent Funds

The fastest-growing product in capital markets of late hasn’t been AI or even crypto. It’s actively managed exchange-traded funds.

Like a mutual fund, an active ETF is run by a portfolio manager who chooses stocks or bonds that fit a common theme like growth or value, or a particular industry like information technology or health care.

The appeal of ETFs is that, unlike mutual funds, investors can instantly buy shares in a fund that is listed on an exchange and sell them at will. What’s more, fees are lower – typically by 30 to 40 basis points, according to Morningstar. And an active ETF’s holdings can be seen at the end of every trading day, whereas mutual funds only have to disclose quarterly.

This fresh take on investing looks increasingly attractive amid market turbulence and unpredictability. “Nobody wants to give over their cash and think they will only look at it on a quarterly basis,” says Vinod Jain, founder of research and advisory firm Adkrest. “They want to know if their money is safe.”

Christopher Murphy, T. Rowe Price

ETFs were passively managed, mimicking indexes like the S&P 500 or Russell 1000 Index of small-cap...