Actively managed exchange traded funds (ETFs) are still a relatively new player on the market, but already some providers and investors may have already written them off. Is it premature to do so?
Actively managed ETFs are still in their infancy, and the segment is still growing. Last week’s launch of two actively managed funds – one apiece from PIMCO and iShares – is proof of that. On top of that, there are several more of these ETFs planned. (Read about the PIMCO launch here).
David Hoffman for InvestmentNews reports that while it may take some time, actively managed ETFs are bound to catch on. That’s because unlike conventional mutual funds, active ETFs allow investors to pay most capital gains upon final sale of the ETF. This feature means that money earmarked for taxes in a mutual fund can continue to grow within an ETF. (Why active management in ETFs have a market of their own).
Edward McRedmond, senior vice president for PowerShares, says what’s lacking in the mutual fund structure could be a boon to the ETFs. Investors should ultimately find them extremely competitive with mutual funds, especially on their tax-efficiency, pricing and transparency.
For more stories about active management, visit our actively managed ETF category.
- PowerShares Active Low Duration Fund (NYSEArca:PLK): up 1.1% year-to-date
- PIMCO Enhanced Short Maturity Strategy Fund (NYSEArca:MINT): launched last week
- Grail RP Growth (NYSEArca:RPX): up 7.9% since inception
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.