Actively managed exchange traded funds haven’t gained much traction in the investment landscape yet, but some veteran observers expect that to change in 2012 as high-profile managers get in the active ETF game.
Index-tracking ETFs have been “tremendous” for investors because of their low expenses and tradability, Josh Brown, a vice president at Fusion IQ and voice of the Reformed Broker blog, told Yahoo Finance’s Daily Ticker on Tuesday.
However, he’s predicting active ETFs will be a major trend in the coming year.
“I think you’re going to see star managers enter this space,” Brown said. “They see that there’s a ton of money to be raised. It’s going to be the new wrapper of choice.” [Active ETFs Wrestle with Disclosure Issues]
Some index-based ETFs have quasi-active strategies rolled into their benchmarks. For example, they may choose and weight individual stocks or securities based on fundamental or quantitative factors. [Index ETFs Rule Despite Promise of Active Funds]
There are several truly active ETFs on the market with managers making trading decisions. Some have gathered significant inflows, but overall assets remain a tiny fraction of the ETF business. [Legg Mason Files to Launch Bond ETF]
Some of the largest include Guggenheim Multi-Asset Income ETF (NYSEArca: CVY), Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT), WisdomTree Asia Local Debt Fund (NYSEArca: ALD) and PowerShares CEF Income Composite Portfolio (NYSEArca: PCEF).
Active ETFs have faced transparency and regulatory hurdles, but the business could get a boost if Pimco launches an ETF version of Total Return Fund as expected in 2012. The giant Pimco bond fund is overseen by Bill Gross. [Pimco Discloses Fees for Total Return ETF]
Other investment managers such as BlackRock, State Street and Legg Mason have filed to launch active ETFs. [State Street Plans Active ETFs]
Pimco Enhanced Short Maturity Strategy Fund
