According to a media report, The SEC may soon issue recommendations allowing the first actively-managed exchange traded fund (ETF). John Spence of Dow Jones NewsWires reports many industry insiders think ETFs as actively-managed are seen as a breakthrough for one of Wall Street’s hottest investments.

But if they build it, will investors come? I don’t think so. Actively managed funds aren’t following an index, and thus, do not have a track record to compare to. Actively managed ETFs will be looked at like any other new conventional mutual fund. In addition, over 65% of ETF purchases are made by institutions and financial advisers who are looking for representation in certain asset classes, sectors, or global regions following a specific index. An actively managed ETF would not be attractive to these folks. So, I wouldn’t be surprised if the opening of the first actively manged ETF will be the most anticipated flop of the year.

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.