Why iShares Filing Opens Active ETF Race

iShares is joining the flood of actively managed exchange traded funds (ETFs) that are racing to market.A recent filing with the Securities and Exchange Commission (SEC) earlier this month reveals that heavyweight ETF provider iShares has filed to join in on the actively managed ETF game. Does this mark a turning point for this segment of the market, now that the biggest player in ETFs is diving in?

The recent filing of iShares funds comes right behind the launches of many actively managed funds from Grail Advisors and PowerShares, and the announcement by Claymore that they would also have active funds, once approved by the SEC.

Mutual fund companies are getting increasingly nervous about actively managed ETFs, which are seen as having the potential to siphon away assets. We’ve been in challenged markets, so it’s hard to gauge the impact they’re having just yet, but as a recovery takes place, we expect that these funds will be getting more than their fair share of assets. After all, they do what mutual funds do, but with more transparency and at a lower cost.

This also is going to kick off a wave of actively managed ETFs, and we’ll be reporting on the trends that develop.

The holdings for each fund will be disclosed daily, prior to the market’s open. The two funds in registration are:

• iShares Active Equity Fund: The fund will actively invest 80% of its assets in the largest 1,000 stocks trading on domestic exchanges.
• iShares Active Fixed Income Fund: The ETF will rely on proprietary quantitative models to allocate across different maturities, yield characteristics and expectations.