Turbulence in China highlights the strengths of active management



The demise of China’s largest real estate developer and its potential effect on the Chinese economy has added stress to already volatile markets. Previous Chinese government regulations in several sectors as well as Delta hampering China’s economic recovery have already created drawbacks in the markets, and now, with the addition of Evergrande’s default on billions of dollars in debt, Chinese markets and investments in China are shaken.

With stocks going back and forth, this is a time when active management really shines, as active managers are able to exit distressed investments with agility and potentially transfer funds to safer ones, while that passive funds face a roller coaster ride until their next rebalancing.

Adviser Investment Management chairman Daniel Wiener, who recently appeared on CNBC’s ETF Edge, believes the time has come for investors “to work with investment managers, portfolio managers with boots on the ground.”

Active managers are able to react in real time to potential market meltdowns in a way that could save investors a lot of money. Periods of volatility are historically when active management really comes to the fore and outperforms the benchmark and passive peers.

Troubled markets for international investors, along with downturns in US markets, provide actively managed funds the perfect opportunity to build on their strengths.

In the long run, Arne Noack of DWS Group told ETF Edge he doesn’t believe Evergrande’s default will be one that has far-reaching effects in the broader markets.

“Evergrande being a struggling development company obviously concerns us, but we don’t see it as a larger systemic risk in China,” Noack said.

T. Rowe Price believes in the difference and benefits of active investing and active management. The company currently offers five actively managed ETFs for investors looking to invest in a record IPO environment that benefits stock pickers. The company brings a wealth of experience and research to its products, with portfolio managers averaging over 20 years of investment each, as well as more than 400 investment professionals dedicated to researching companies within ETFs.

For more news, information and strategy, visit Active ETF Channel.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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