Actively Managed ETFs: The Next Frontier?
May 1st 2012 at 8:00am by Tom Lydon
Will 2012 be the year that the actively managed exchange traded fund finally takes off? Plenty of industry insiders are certain this is the fund of the future.
Actively managed ETFs have had assets grow about 64% over the past three years, with exchange traded products growing a total of 13% over the same time period. The recent launch of State Street’s three actively managed ETFs last Thursday now brings the total to 47 for the sector, compared to 1,500 ETPs in total, reports James Armstrong for Traders Magazine. [Schwab Files to Introduce Actively Managed ETFs]
Laura Morrison, head of U.S. ETP listing and trading for NYSE Euronext, says that about 9 ETF providers offer actively managed ETFs, but about 30 more have filed to launch sometime this year. For example, firms including AllianceBernstein, Deutsche Bank, Eaton Vance, Janus, JPMorgan, T. Rowe Price and Vanguard have all filed with regulators to issue actively managed ETFs in the future.
“The ETF structure is superior for actively managed strategies as well, in part due to their transparency. For a manager that takes large, highly concentrated positions, that transparency might be a hindrance, but it most cases, it’s a good thing,” Jonathan Steinberg, founder and chief executive officer of WisdomTree said.
The transparency of an ETF has been a major hang up for the industry. The idea that holdings are available in real time, at any time of day, opens up the doors for front-running. Are managers afraid of giving up their strategies and expertise? [Investors Actively Manage Passive ETFs]
“Actively managing an ETF means that investors are free to simply copy a strategy without paying a management fee, but as a practical matter, that usually doesn’t happen. Most rational people aren’t going to go every day to my Web site to see what percentage each holding is,” Noah Hamman, founder and chief executive officer of AdvisorShares said. [ETFs vs. Active Managers]
ETFs have rapidly expanded and investors are positive about the merits of the funds. The active management space is likened to be the next frontier for this prolific industry.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.