With the new year underway, many investors are taking stock of 2024 amid 2025 market outlook uncertainty. Geopolitical risk lingers for the global market, while many developed markets are still working to pull off a so-called “soft landing” following major post-pandemic inflation. The opportunity is presenting itself, then, to revisit the variety of investment approaches available from asset managers engaged in active ETF investing.
Single Manager Approach
Many firms look to a “single manager approach” to managing assets, meaning thata “star” manager scrutinizes investment opportunities before picking all of them by themselves. There are plenty of cases in history where that strategy has borne fruit; going back almost 100 years., individual investors’ calls helped their names live on for decades.
Committee Approach
Investors may also consider firms that apply a “committee” approach. In those firms, asset managers come together as teams, reaching a “consensus” on each potential investment in a portfolio. That brings the power of multiple minds coming together to reach a single conclusion.
Capital Group Approach
The “Capital Group” approach, otherwise known as the Capital System, provides a third view. Its investment approach combines a bit of each of the prior two approaches. Its multi-manager system empowers individual managers to each oversee a portion of a portfolio, making calls on their own for their “sleeve.”
Managers in the Capital Group system have the freedom to craft their own insights, sharing them with their colleagues. That approach doesn’t just result in diverse portfolios, but might also reduce manager turnover and related disruptions. It also empowers individual managers to go very deep on a small set of high-conviction ideas.
“If a typical mutual fund has a star manager with 120 of her best ideas for investments, that’s a lot of ideas for one person to track,” said Capital Group. “But imagine if the fund were divided among four managers, including each of their 30 highest-conviction ideas — ideas they’ve explored inside out — that’s The Capital System.”
All three approaches provide a different view into what attributes investors might prioritize in active ETF investing. Some look to singular, experienced, high-conviction takes from a star manager. Others look to combine the scrutiny of multiple managers to craft an overall portfolio. Together, that could present some appealing options for investors looking ahead to 2025.