Actively managed exchange traded funds (ETFs) are on the cusp of explosive growth right now, and there are a bevy of new active ETFs poised for take-off to begin the new phase of growth.
ETF industry veterans and newcomers are getting on board with actively managed ETFs by filing with the Securities and Exchange Commission (SEC) to launch their own such funds. Names include PIMCO, Goldman Sachs, Claymore and Vanguard. [Hurdles Facing Actively Managed ETFs.]
Shishir for In Focus says that active ETFs are at a crossroads: their growth could explode or they could fade away. Much of that depends on how new issuers grasp two huge opportunities that active ETFs are presented with today:
- Grabbing mutual fund market share: The U.S. mutual fund industry currently manages in excess of $12 trillion in assets, with global mutual funds managing more than $26 trillion. In comparison, active ETFs in the United States currently manage about $200 million. Active ETFs do have lower expense ratios than mutual funds, along with transparency, so the potential here is huge if investors realize the superior benefits.
- Grabbing the 401(k) retirement market share: With daily disclosure of holdings, investors will know exactly what’s going in their portfolios. That also helps reduce any deviations of the market price from the fund’s net asset value. This is what makes these new products attractive to financial advisors, who are most often the gatekeepers to investors’ 401(k) plans. Although mutual funds are a staple of the retirement market, ETFs (including active ones) have the ability to take that market share as their attributes become known. [4 Big Benefits of ETFs.]
For more stories about active ETFs, visit our actively managed ETF category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.