Actively managed exchange traded funds have yet to find a breakthrough into the mainstream investing market. To date, there are about 55 actively managed ETFs trading, which accounts for only 5% of total assets.
“When we look at the ETF structure, there’s nothing inherent about the ETF structure that it says that it has to be passive. Although the preponderance of assets today are actually in passive funds and funds that serve as more of substitutes for single stock trading or single fixed income trading, the reality is that the ETF structure is one that just says that this fund is traded on an exchange as opposed to an open-end structure, which is bought or sold through the fund company or through a wholesaler,” Scott Burns said in a Morningstar interview.
The latest distribution strategy for active management with ETFs is through mutual fund companies that are breaking into the ETF business. The well-known cost-efficiency of passive and active ETFs beat out the price of most mutual funds. Furthermore, many mutual fund providers have seen the market share that is up for the taking within the active ETF industry.
AdvisorShares has the highest number of active ETFs trading currently, with 16 in total, followed by WisdomTree that offers 14 choices. PIMCO follows up with 6 actively managed ETFs and State Street Global Advisors offers 3, reports Juliette Fairley for Financial Advisor Magazine. The many advantages that ETFs offer investors include, but are not limited to, intraday trading, total transparency, lower fees and the flexibility to access corners of the market. [Fidelity Active ETFs Would Gain Market Share]
“Because of the unique operational structure of exchange-traded funds, many cost benefits can be realized at the fund level and passed through to shareholders resulting in lower expense ratios,”Kevin W. Quigg, global head of State Street’s ETF strategy and consulting group said. [ETF Asset Growth Remains Strong in 2012]