The actively managed exchange traded fund space, once pushed to the side, is now attracting a greater following, especially in the wake of highly successful PIMCO Total Return ETF (NYSEArca: BOND) launch. Now, State Street Global Advisors is testing the waters with its first active ETFs.
On Thursday, the fund provider launched the SPDR SSgA Multi-Asset Real Return ETF (NYSEArca: RLY), SPDR SSgA Income Allocation ETF (NYSEArca: INKM) and SPDR SSgA Global Allocation ETF (NYSEArca: GAL).
These new actively managed ETFs will serve as fund-of-funds – these new offerings will hold a variety of ETFs from various fund providers. The active managers will evaluate the expected returns and risks of each underlying asset class, or ETF holdings. Accordingly, weightings of the individual ETF components will change, along with the manager’s expectations.
“I can see active ETFs being a larger part of the ETF landscape,” James Ross, senior managing director of State Street Global Advisors, said in a Bloomberg News story. “We obviously plan to participate in that growing market.”
Actively managed ETFs differ from traditional, passive index ETFs in that a manager constantly monitors the active ETF. Passive ETFs try to reflect the performance of a benchmark index as closely as possible.
RLY holds ETFs that follow securities related to commodities, inflation protection, real estate and natural resource companies. For instance, the top expected holdings are SPDR S&P Global Natural Resources (NYSEArca: GNR) 25%, PowerShares DB Commodity Index Tracking (NYSEArca: DBC) 20% and SPDR Barclays Capital TIPs (NYSEArca: IPE) 15%. RLY has an expense ratio of 0.70%.