The following active ETFs represent about two-thirds of the total assets under management in this category:
- PIMCO Total Return (NYSEArca:BOND) $2.5 billion in AUM
- Enhanced Maturity Strategy ETF (NYSEArca: MINT) $1.9 billion
- WisdomTree Emerging Markets Local Debt ETF (NYSEArca: ELD) $1.2 billion
Benefits of an active strategy include the ability to beat the market, with the luck or knowledge of a good manager. The transparency factor is negotiable – many say that active funds are fully opaque, but others argue that all ETFs are transparent. [An Emerging Market Debt ETF For Growth]
Active ETFs present challenges for investors because they are more expensive than passive funds, and higher expenses do not equal higher returns. Also, the ability to trade both active and passive funds is not necessarily a plus. Too many trades can equal higher fees. Some industry insiders argue this creates too much of a short term mindset, rather than focusing in on the big picture for the long term.
There’s one big advantage to these highly complicated, but still technically index ETFs: The Securities and Exchange Commission is not allowing new actively managed ETFs to use derivatives, reports Mike Hogan for Barron’s.
Tisha Guerrero contributed to this article.