Additionally, these ETFs will have a higher portfolio turnover rate as they follow their active strategies, compared to funds that passively track a benchmark index. The active funds may also invest in currency forwards for hedging and trade settlements. The funds also reserve the right to lend up to one-third of their total assets.
These new SEC filings come at a time when other “smart beta” ETF strategies are growing in popularity. These types of low volatility, or “strategic beta,” funds try to mitigate the large swings in the market by screening for companies that have exhibited low volatility in their returns. The largest of which is the Powershares S&P 500 Low Volatility ETF (NYSEArca: SPLV).
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.