Kevin O'Leary is making the case for active management.
The O'Shares ETFs chairman and "Shark Tank" investor said Monday that finding quality is paramount in an uncertain market environment like this one, and that active management may be one of the few reliable ways to achieve it.
"Now, quality really matters," O'Leary told CNBC's "ETF Edge." "Now, you really care to cherry-pick, and this is what I love about the actively managed ETF sector."
Just three years ago, things looked grim for active managers, many of whom hadn't beaten the market for years. Their outlook improved slightly earlier this year with the launch of nontransparent ETFs, but the latest bout of market volatility could be the best reason yet for investors to consider backing the strategy, O'Leary said.
"It's actually doing its work very well because in the case of OUSA," the O'Shares FTSE U.S. Quality Dividend ETF, "that's 130-plus of the S&P, but the highest-quality balance sheets, which generally speaking are higher and more unlikely to cut dividends," O'Leary said.
"So, if you're using OUSA as a dividend play, which many people are doing right now with [a] north of 3% dividend yield, it's a very good place to hide in the weeds," he said.
OUSA, O'Shares' oldest ETF, says it invests in stocks that "meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds." It is down 12.5% year to date.
"This is a time to use actively managed ETFs that focus on things like quality if you're worried about companies that are going to fail or at least reduce dividend yields, and there's going to be plenty of them," O'Leary said.
"I think there are sectors that are going to come out of this much better, obviously, than others. Virus stocks versus nonvirus stocks," he said. "I'm not loving Disney right now for obvious reasons, but there's lots of companies that have actually done much better inside of the S&P 500 that aren't as worried about the effects of long-term concern to the virus."
OUSA fell slightly in Tuesday afternoon trading.
Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."