Actively-managed exchange traded funds (ETFs) were touted as the next big thing. But another year has gone by and active ETFs have yet to catch on. But more fund providers are stepping forward, and investors will be exposed to more actively-managed products.
In the beginning of 2010, 22 actively-managed ETFs were available, writes Shishir Nigam for In Focus. As we near the end of 2010, there are now 33 actively-managed ETFs available, with close to $3 billion in assets, from 7 major fund providers. [Guggenheim Files for Active Short Junk Bond ETF.]
The greatest change in this niche market has been that more fund providers are expressing a growing interest in active ETFs, and companies are filing exemptive relief applications with the SEC to launch new actively-managed ETFs. So far, 26 money managers, including well-established names, have pending applications for actively-managed ETFs. [Eaton Vance Takes New Approach to ETF Market.]
Still, the active ETF market will have to contend with new SEC regulations on derivatives. Actively managed ETFs will also have to be more transparent than their mutual fund counterparts, which is portfolio managers cite as cause for front-running. Additionally, many investors do not understand the merits of active ETFs, but that is understandable since active ETFs have only been around for 2.5 years.
Former iShares Chief Executive Officer Lee Kranefuss believes that true active ETFs which mimic hedge funds, with long-short hedge funds who are interested in implementing an ETF strategy, will eventually become a common theme, writes Olivier Ludwig for IndexUniverse.
Kranefuss also adds that alpha can still be obtained in an active ETF strategy, even in a transparent industry since winning managers will be so prescient that possible copy cats would be unable to rationalize the strategy.
For more information on actively managed ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.
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.