How TCW’s Fundamental Research and Relative Value Sets it Apart in a Crowded Market

The amount of ETF innovation seen in the market these days is hard to keep up with.

Leverage. Buffers. Digital assets.

No one could blame you for turning inward, or turning to strategies of old.

Advisor Upside sat down with TCW’s head of ETFs Scott Dennis to talk about the state of ETF innovation. Read the conversation below.

Q: We have seen an explosion in flows toward actively traded ETFs in recent years. What do you think is driving allocators and advisors toward active management?

A: Look no further than oil markets and their impact on asset prices in the last three weeks — markets today are both more volatile and more concentrated than ever before. In 2025, the 10 largest companies equated to nearly 40% of the S&P 500 Market Cap, versus less than 20% in 2015. For advisors, that has exposed the shortcomings of static, index-only portfolios and created a need to build more dynamic portfolios that act proactively, not reactively. 

Active ETFs allow advisors to combine the structural benefits of the ETF wrapper that we all know and love (tax efficiency, liquidity, transparency) with active risk management. So instead of trading around duration, credit, or sector exposure themselves with an in-house team, advisors are outsourcing those decisions to experienced managers who can pivot quickly as conditions change. That efficiency has become especially valuable in fast-moving markets.
So to us it’s not that surprising that the active ETF space is growing quickly. Advisors have effectively been doing the same things themselves forever by using ETF models with beta ETFs as building blocks, rebalancing periodically (quarterly, annually) around market events. The current market environment has simply created the need for more frequent rebalancing, and advisors are turning to active ETFs as a solution.

Q: There have been a lot of launches around outcome-based, single stock, leveraged, and quant based approach? What is your take on that new wave of product?

A: Innovation has absolutely expanded the menu for advisors, but it has also created a real bar for due diligence and suitability. Many of these products can be useful in very specific situations, but they often introduce complexities, and often real risk, that might be more than what an advisor was bargaining for. Path dependency, leverage, options risk — they all require robust education and monitoring.

At TCW, we’re deliberate about where we innovate. We focus on areas where we have deep, longstanding expertise — relative value fixed income and high conviction equity research — rather than launching products simply because they are trendy. We believe the strategies that endure are grounded in fundamental research and risk management, not novelty.  

That discipline shows up in how we’ve built our ETFs. Active management is used to manage risk and express conviction, not to introduce additional layers of structural complexity. 

Q: Tell us a bit about TCW and its approach to investment allocation.

A: TCW is a fundamentally driven active manager with deep roots in relative value investing across asset classes. Our starting point has always been getting a real read on risk, that’s the baseline. How is a portfolio going to behave across different conditions or exogenous factors? In our mind that’s equally important as performance metrics. 

Within our ETF platform, we build strategies with clear portfolio roles, whether that’s income generation, risk mitigation, or long-term thematic growth. The goal is not to replicate benchmarks, but to complement core allocations with active exposure where it can materially improve outcomes.

As markets have become more concentrated and regime shifts more frequent, that portfolio outcome focus has become increasingly important for advisors looking to balance flexibility with accountability.

Q: What does the TCW research process look like?

A: It’s interesting — we’ve set it up in a specific way depending on asset class. IIn fixed income, portfolios are managed through a dual-PM structure that pairs Generalist and Specialist Portfolio Managers. Generalist PMs are responsible for setting the top-down framework, including the long-term economic outlook, defining risk parameters, and figuring out where we want to allocate capital along the yield curve and across sectors. At the same time we have specialist PMs run the bottom-up process, leading dedicated research teams focused on security selection, relative value analysis, and trade execution within their sectors which our traders can execute on.

On the equity side, we operate with a dedicated fundamental research organization structured by industry. Each analyst “owns the space” within their sector and is responsible for deep company research, valuation work, and idea generation. That specialization ensures a consistent pipeline of differentiated investment ideas flowing directly to portfolio managers, rather than relying on generalized screens or models.

Across asset classes, the common thread is accountability: clearly defined roles, constant debate, and active risk monitoring. We feel like that’s what sets us apart.

Q: Can you walk us through a high conviction idea that has come from the TCW research team?

A: Two areas of conviction for us right now are flexible fixed income and structural equity themes viewed through a systems lens, both of which are expressed in our ETF lineup.

For example, in today’s environment, higher starting yields have restored bonds as an income engine, but benchmark-constrained exposure can still limit outcomes. FLXR is designed to actively manage duration, credit quality, and sector allocation — allowing the portfolio to pivot as relative value shifts. For instance, when credit spreads widen or sector fundamentals change, FLXR’s managers can adjust exposures in real time, rather than locking investors into static allocations. This flexibility is especially valuable for advisors seeking to balance income generation with risk management across market cycles.

On the equity side, our work around power, infrastructure, and energy transition looks beyond narrow labels to the broader systems driving long-duration change. We focus on selectivity — identifying where fundamentals, valuation, and long-term demand intersect — rather than chasing short-term trends.

Q: What keeps you up at night?

A: Complacency — particularly around concentration and structural risk. Strong performance and dominant narratives can mask how narrowly returns are being generated across markets.

Our responsibility as active managers is to stay disciplined, diversify thoughtfully, and ensure portfolios are resilient. That means continuously reassessing risk and portfolio construction choices, not reacting only after conditions have already changed.

As active ETFs continue to grow rapidly, we’re also mindful that speed to market can sometimes come at the expense of structure. Not every strategy or security is well suited for the ETF wrapper and getting the mechanics right across portfolio construction, the in-kind process, or tax management matters. 

In our view, sound design and discipline should always outweigh the urgency to scale quickly.

Interested in learning more about how TCW approaches capital allocation? Learn more here.

Disclaimers

Investing Involves Risk and Possible Loss of Principal.
 Distributed by Foreside Financial Services, LLC.
TCW Flexible Income ETF (FLXR)

TCW Transform Systems ETF (PWRD)