As the traditional beta indexing exchange traded fund space fills out, fund sponsors are beginning to move into the next frontier: actively managed ETFs.
According to a recent SEC filing, Arrow Investments plans to ccreate three actively managed “fund of funds” ETFs – ETFs that are comprised of other ETFs.
- The Arrow Balanced ETF will maintain a balanced portfolio of 25% to 65% in equities, 25% to 65% in fixed income securities and 10% to 40% in alternative assets.
- TheArrow Tactical ETF will utilize technical analysis, such as analyzing statistics generated by market activity and trading volume to determine allocations. The fund will hold from 0% to 100% in equities, 0% to 100% in fixed income securities and 0% to 90% in alternative assets.
- The Arrow Tactical Yield ETF will follow two income strategies that focus on securities with high beta and low beta – beta is a measure of volatility or risk. High beta assets are selected based on credit and equity risk premiums, and low beta picks are selected based on inflation, interest and credit risk. The fund will hold a 20% to 80% allocation toward low beta equity and fixed income securities, and 20% to 80% in high beta equity and fixed income securities. It can hold REITs and currencies as well.
According to a SEC filing, ProShares is planning the ProShares CS Long North American HY Credit ETF, an actively managed CDS ETF. The fund will provide exposure to credit risk by investing in index-based credit default swaps and is designed to appreciate in value when North American junk bond credit markets improve. [Growing Interest for Actively Managed ETFs: SEI Report]
Credit default swaps are a type of financial swap agreement that provide a way to speculate on loan defaults or other credit events.
According to an updated SEC filing, IndexIQ is also planning four actively managed bullish equity ETFs, along with its previously submitted bearish strategies.
- IQ Bear Large Cap U.S. ETF.
- IQ Bear Small Cap U.S. ETF.
- IQ Bear International ETF.
- IQ Bear Emerging Markets ETF.
- IQ Bull Large Cap U.S. ETF.
- IQ Bull Small Cap U.S. ETF.
- IQ Bull International ETF.
- IQ Bull Emerging Markets ETF.
There are currently 62 actively managed U.S.-listed ETFs available, with $14.4 billion in assets, according to XTF. In comparison, there are 1,463 ETFs with $1.5 trillion in assets. [The Actively Managed ETF Landscape]
For more information on active funds, visit our actively managed ETFs category.
Max Chen contributed to this article.