With more mutual fund issuers considering entry into the actively managed exchange traded fund space, the main deterrent is fees.
Vince Lowry, founder and president of RevenueShares, believes that while the mutual fund industry may be griping about the transparency issue associated with ETFs, their main concern are the lower management fees, reports Jeff Benjamin for InvestmentNews. [Mutual Funds & ETFs: If You Can’t Beat ‘Em, Join ‘Em]
“I personally believe the issue of transparent portfolios [for active ETFs]is not as big a problem as the fund companies want you to think it is,” Lowry said in the InvestmentNews article. “The real issue is the active mutual fund managers will have to cut their fees in half if they start offering active ETFs.”
The 85 U.S.-listed actively managed ETFs on the market have an average 0.84% expense ratio, according to XTF data.
Some companies are also concerned that an active ETF version of existing mutual fund strategies would pull in more investment interest and potentially cannibalize the mutual fund. [Passive Indexing in Active Portfolios]
“If they get into the ETF arena with similar funds that they’ve built a whole business on, the sales force doesn’t want it to happen because they would make less money and the company profits will also fall,” Lowry added.