Each year, as we look ahead to the second half, we like to look back on the trends we envisioned at the start of the year and whether or not these predictions came true. In late 2019, the three trends we identified were the advent of active non-transparent ETFs, growth in direct indexing activity, and increased interest in fixed income ETFs. It was our belief that all of this would occur during a year that would see an uptick in volatility. Let’s look at how we did – then turn our attention to the second half of 2020.

Scorecard: First-Half Outlook
Firstly, we have seen a number of active non-transparent ETFs filed over the last six months, in addition to the market launch of some of the sector’s first strategies. We expect activity in the active non-transparent space to continue. Admittedly, the topic of direct indexing has been eclipsed since early March in light of the COVID-19 pandemic. Nevertheless, as global economies begin to reopen, investors may want to consider tax-managed SMA strategies, which can provide opportunities to harvest portfolio losses and enhance after-tax returns. For our third outlook trend, we envisioned fixed income ETFs would be in more demand than equity ETFs in 2020 as a result of increased volatility. This has turned out to be what is arguably our most accurate forecast. As spring turns to summer, let’s review some of the themes we’re considering for the second half.

Second-Half Outlook – 3 Trends
Trend #1 – Equity markets will likely remain extremely volatile.
As health officials, policymakers, and financial professionals worldwide work to understand the near and long-term ramifications of the COVID-19 pandemic, we anticipate that investors will remain cautious. Despite the all-time low in bond yields, we believe investors will likely continue to favor fixed income ETFs over equity ETFs. Equity ETF investors may seek out ETFs designed to manage risk, such as low/min volatility strategies and strategies focused on the US markets or international developed markets, rather than emerging markets. The Natixis Seeyond International Minimum Volatility ETF (MVIN) and the Natixis Loomis Sayles Short Duration Income (LSST) are among the strategies available for investors to consider.

Trend #2 – Alternative investment ETFs may generate more conversation.
While we don’t expect significant new flows into alternative ETFs, we expect that some investors may become more open to market neutral, long/short and managed futures ETF strategies. Each of these strategy types is designed to help benefit portfolios in volatile markets and/or conditions that present greater-than-average downside risk. Perhaps we’ll see increased assets here, as well as more new alternative ETFs coming to market.

Trend #3 – An increase in tax-loss harvesting activity as the year ends.
As the year comes to a close in November and December, we expect to see investors realizing losses suffered earlier in the year during the COVID-19 market downturn. As they seek to rotate this money into new investments, traders and institutional investors may consider more cyclical sectors. Historically, cyclical sectors tend to help lead an economy out of a downturn. As a result, cyclicals could be positioned for a very strong 2021. Investors interested in an asset manager-driven tax loss harvesting program may want to consider low-cost separately managed accounts, such as those managed by the Natixis affiliate Active Index Advisors (AIA).

While many market watchers anticipated volatility in 2020, nobody could have predicted the extent to which economies – and everyday life – would be impacted by the COVID-19 pandemic over just a few months. The good news is that frontline healthcare workers and policymakers have worked tirelessly to respond to the crisis, allowing for considerations about a safe, economic reopening to begin. In the meantime, investors may want to consider the importance of risk management and long-term goals as they position their portfolios for the months ahead.
An exchange-traded fund, or ETF, is a marketable security that tracks an index, commodity, bonds, or a basket of assets like an index fund. ETFs trade like common stock on a stock exchange and experience price fluctuations throughout the day as they are bought and sold. Short-term fixed income ETFs invest in fixed income securities with durations between one and five years.

Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over some period.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, money market and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Unlike passive investments, there are no indexes that an active investment attempts to track or replicate. Thus, the ability of an active investment to achieve its objectives will depend on the effectiveness of the investment manager.

Diversification does not guarantee a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Asset allocation does not ensure a profit or protect against loss.

ETF General Risk: Exchange-Traded Funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are not individually redeemable directly with the Fund, and are bought and sold on the secondary market at market price, which may be higher or lower than the ETF's net asset value (NAV). Transactions in shares of ETFs will result in brokerage commissions, which will reduce returns. Active ETF: Unlike typical exchange-traded funds, there are no indexes that the Fund attempts to track or replicate. Thus, the ability of the Fund to achieve its objectives will depend on the effectiveness of the portfolio manager. There is no assurance that the investment process will consistently lead to successful investing. Fixed Income Securities Risk: Fixed income securities may carry one or more of the following risks: credit, interest rate (as interest rates rise bond prices usually fall), inflation and liquidity. Below Investment Grade Securities Risk: Below investment grade fixed income securities may be subject to greater risks (including the risk of default) than other fixed income securities. Foreign and Emerging Market Securities Risk: Foreign and emerging market securities may be subject to greater political, economic, environmental, credit, currency and information risks. Foreign securities may be subject to higher volatility than US securities, due to varying degrees of regulation and limited liquidity. These risks are magnified in emerging markets. Interest Rate Risk: Interest rate risk is a major risk to all bondholders. As rates rise, existing bonds that offer a lower rate of return decline in value because newly issued bonds that pay higher rates are more attractive to investors.

Before investing, consider the fund's investment objectives, risks, charges, and expenses. Visit im.natixis.com for a prospectus or a summary prospectus containing this and other information. Read it carefully.

ALPS Distributors, Inc. is the distributor of the Natixis Loomis Sayles Short Duration Income ETF and for the Natixis Seeyond International Minimum Volatility ETF. Natixis Distribution, L.P. is a marketing agent. ALPS Distributors, Inc. is not affiliated with Natixis Distribution, L.P.. Natixis Distribution, L.P. is a marketing agent. ALPS Distributors, Inc. is not affiliated with Natixis Distribution, L.P.

Natixis Distribution, L.P. (fund distributor, member FINRA|SIPC) and Loomis, Sayles & Company, L.P. are affiliated.

Seeyond is operated in the US through Natixis Asset Management U.S., LLC.