The actively managed exchange traded fund (ETF) doesn’t seem to be turning any heads.
After all, we’ve heard it all before. First, actively managed mutual funds can be the market. Then, hedge funds can beat the market. And now, ETFs are up to bat.
Ron DeLegge for ETF Guide doesn’t sound too impressed, and here is his list of pluses and minuses:
- Pros Active ETFs: ETF product structure is tax efficient; possible lower internal portfolio turnover, compared to an actively managed mutual fund; lower expense ratios than those of mutual funds.
- Cons of Active ETFs: More frequent portfolio disclosure than a mutual fund; higher costs than index ETFs; beating the market over the long run is still an uphill battle; no proven performance track record.
DeLegge says that looking to large-cap companies to beat the market probably won’t be successful, as studies have shown that most large-cap fund managers consistently underperform corresponding indexes.