Active management performs best with volatility, says Paul Kim, head of ETF Strategy for Principal, at the 2020 Inside ETFs conference.
Kim said Principal has two types of active ETFs—actively managed and strategic beta—that are poised to outperform when volatility returns.
"When you start seeing volatility in markets, it's a good reminder that fundamentals matter," Kim said. "That having a thoroughly vetted investment process that knows what they're doing and is specialized in their asset class or sector, those end up in the long run outperforming."
Kim said even though volatility is returning, it's still at modest levels historically.
"We feel very late cycle in the economy, in the credit cycle, and historically, as you reach those points, volatility starts creeping up," he said. "And so we anticipate higher volatility over the near-term and medium-term."