Active ETFs have higher costs than index-based funds partly due to stricter disclosure requirements, Mindful Money reported. There are also higher management fees because managers are selecting securities for the portfolio, rather than tracking an objective index. [Active ETFs: To Fee or Not to Fee?]
Transparency is a main attraction of passively managed ETFs, which disclose their holdinsg during the trading day. For active funds, the problem of front-running is an issue. [Why Actively Managed ETFs Haven’t Taken Off Yet]
“A primary obstacle to growth of actively managed equity ETFs is the likely reluctance of successful managers to abide by the expectations that holdings be disclosed daily,” said Tom Graves, S&P equity analyst, according to the FT report.
Tisha Guerrero contributed to this article.