The actively managed ETF space accounts for less than 0.5% of the $1.2 trillion U.S. ETF market. The largest actively managed ETFs track bonds, including the PIMCO Enhanced Short Maturity Strategy Fund (NYSEArca: MINT) and the WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD). Disclosure in bonds is less of a problem since it is harder to replicate.
“Fixed-income opportunities tend to be broader, and each security carries its own set of subtle characteristics, which can enable an experienced active manager to add value,” Don Suskind, head of ETF product management at Pacific Investment Management Co., said in the article.
Navigate Fund Solutions, a subsidiary of Eaton Vance, is developing a hybrid process called exchange traded managed funds, or EMTFs, as a solution to the dilemma. Managers would not publicize positions being initiated or bumped until trades are settled, and investors would not know the exact value of shares until the market closes.
Last August, BlackRock has filed with the SEC to launch active ETFs that wouldn’t follow current daily disclosure practices and operate from a blind trust.
Guggenheim Investments has proposed a proxy portfolio that would closely mimic an ETF’s actual movements through the course of a trading day but specific holdings would be different.
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.