As actively managed exchange traded funds (ETFs) launch and new issues await in the pipeline, one thing is plainly evident: this segment of the industry is about to get a whole lot bigger.
To date, there are about a dozen actively managed ETFs trading on the market, and about twice as many in the pipeline waiting for regulatory approval. It may seem contradictory to have a manager picking stocks, since until recently, ETFs have been known primarily for the fact that they passively track indexes, says Thomas M. Anderson for Kiplinger.
Despite the fact that actively managed ETFs haven’t yet gone gangbusters with investors, the industry is getting very busy in anticipation, says Shishir Nigam for Active ETFs in Focus.
Many more new issuers are seeking entry into the party through new filings for actively managed ETFs, while others built on their bases and registered new products. These issuers included Emerald Rock Advisors, Dreyfus, Cambria Investment, DoubleLine Funds and BlackRock.
BlackRock’s entry is particularly interesting, because it is looking to create an active ETF with reduced disclosure, a development that could make a huge difference to the level of comfort active managers have behind these funds.
The issue of transparency has been one of the primary concerns of active managers of ETFs. Current regulations require active ETFs to provide daily disclosure of holdings with a one-day lag. This means that any active manager using a unique investment strategy will be forced to reveal their strategies to the wider public, which could lead to other managers imitating the change in holdings, reports Shishir Nigram for Active ETFs. [Alliance Files for Actively Managed ETFs.]
Whatever the issues left to iron out may be, if active ETFs prove that they can deliver on performance, investors may come calling. Investors may also simply warm up to the fact that while the active management structure resembles the mutual fund model, active ETFs are competitively priced and have intraday liquidity, as well.
For more stories about actively managed ETFs, visit our actively managed category.
Tisha Guerrero contributed to this article.