The actively managed exchange traded fund category appears to be gaining momentum with the recent success of the PIMCO Total  Return ETF (NYSEArca: BOND).  There has been a slew of active ETFs recently launched, which has led many to wonder how active management is defined with an ETF.

“The active ETF universe is ‘heterogeneous,'” Robert Goldsborough of Morningstar said, though heavily skewed toward fixed income. “There are a lot of unique strategies, but not a lot of mainstream equity entries yet.”

It’s also still just a tiny sliver of the industry: Active ETFs have just under $7 billion altogether, Goldsborough says. There’s $1.2 trillion in U.S. ETFs. [Why PIMCO Total Return ETF is Beating It’s Mutual Fund Counterpart]

The definition of active management in the ETF industry is subjective. Index Universe goes by the Securities and Exchange Commission’s definition where index funds reflect changes within the stock weightings of the tracking index immediately, but actively managed funds can wait a day, reports Chris Gay for US News.

However, Morningstar defines active management with whether or not the ETF in question lists a benchmark index. If the prospectus does not list one, it is likely actively managed. [Will ETFs Replace Money Market Funds?]

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