Actively managed exchange traded funds (ETFs) have gotten off to a slow start as investors wait to see how they do. Meanwhile, though, the line of providers looking to launch such products is stretching around the block.
Trang Ho for Investor’s Business Daily reports that there are 17 actively managed ETFs trading and about 6 firms are flirting with bringing products to market. Ho caught up with Noah Hamman, CEO of AdvisorShares, one of the ETF providers working to make actively managed ETFs popular with investors of all types. [Hurdles Facing Actively Managed ETFs.]
It seems like every day, a provider announces its intention to launch active funds in addition to the products already on the scene. Grail Advisors, PowerShares and PIMCO have all launched quality actively managed ETFs in recent years and more big names are in the pipeline. These include Hancock, Vanguard, Grail, T. Rowe Price and Legg Mason. With those kinds of names standing behind these products, investors might find them to be an irresistible lure.
Here are some other developments and facts going on behind the scenes with active ETFs, according to Hamman:
- Actively managed ETFs provide investors with the best features of ETFs, including tax efficiency, intraday liquidity and transparency, with true professional money management. [Get Smart With ‘Intelligent ETFs.’]
- Some consider commissions and trading spreads in the purchase or sale of an ETF to be a negative feature. However, as of late, some brokerage commissions are being cut to zero.
- Just like buying a stock, trading spreads between bid and ask are just the nature of being traded on an exchange. But this is what allows actively managed ETFs to have one of their biggest advantages over mutual funds — the ability for investors to have the investment flexibility of placing limit and stop-loss orders. [10 Tips for Trading ETFs.]
- An actively managed ETF’s in-kind creation and redemption process should make it far more tax efficient than an actively managed mutual fund with the same investment objective. [Active ETFs: The Trend in 2010?]
For more stories about active management, visit our actively managed ETFs category.
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.