ETF Trends
ETF Trends

The wait for the first true actively managed exchange traded fund (ETF) continues … Looks like Vanguard and Bear Stearns are trying to be the first to market.  In Vanguard’s case, the ETF will be another share class of an existing mutual fund. This fund manager builds a fixed-income portfolio of Treasury Inflation Protected Securities, or TIPs. It seems hard to believe the company that touts indexing is pushing for actively managed ETFs. As they see it, it is just another distribution.

Rob Wherry for SmartMoney reports there is a lot of talk about the first actively managed ETF and who will be the first to market. Vanguard and Bear Stearns seem to be the main contenders at this point. Of course, it is up to the SEC to approve such a product before investors can dive in.

The success of ETFs entices active managers to run an actively managed ETF, but the whole point of an ETF is to follow an index and have lower fees. ETFs have their roots in sectors and sub-sectors of indexes. As such, investors will look to indexes for the benchmarks, not active management. Actively managed ETFs have no track record — no benchmark. There is no guarantee a mutual fund manager can provide performance results with an ETF.

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.