MutualFundWire.com: Active ETF Clones Outshine Their MF Models. Why?

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Wednesday, July 3, 2024

Active ETF Clones Outshine Their MF Models. Why?

Active ETFs that mimic specific existing open-end mutual funds are outshining them, at least when it comes to stock funds, according to new research from a consulting ally to fundsters.

Michael Page
Fuse Research Network
Research Associate

Michael Page, research associate at Fuse Research Network, revealed last week that the vast majority (88 percent) of actively managed equity ETF clones outperform the open-end funds they're mirroring. The data looks at 26 active equity ETF clones.

On average, over the three years ending in the first quarter of 2024 (i.e. last quarter), those active ETF clones outperformed their model mutual funds by 104 basis points each.

Page highlights three factors driving the ETF clones to outpace their mutual fund brethren. Those factors are: tax efficiency, returns, and expenses.

85 percent of the active ETF clones had a lower "tax-cost ratio" over the trailing three years than the open-end funds they mimic. Pre-tax returns boosted the ETF clones' performance by an average of 26bps. And the ETF clones' expense ratios were 4bps lower on average.

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