There are many actively managed ETFs in the pipeline but so far this segment of the business has grown in fits and starts. Most of the industry’s assets are in passively managed ETFs that follow indices.
“Actively managed ETFs still account for a scant percentage of overall exchange traded products assets and the actively managed space is dominated by just a handful of funds. However, the number of new entrants to the arena continues to expand, giving investors ample opportunity to consider the merits of active management,” according to Benzinga. [Many Active ETFs Struggle to Survive]
Many investors may be pondering if these types of ETFs belong in their portfolios. Robert Powell for MarketWatch reports that active ETFs try to outperform traditional benchmarks rather than replicate them.
Stephan Horan of the CFA Institute says what the choice between active or passive ETFs boils down to is the pros and cons of ETF investing versus traditional mutual funds.
First, when it comes to passive investing, the pros include low fees, lower transaction costs and the stable performance relative to a certain benchmark. “Active management, by contrast, provides an opportunity for some investors to outperform a benchmark even if the data suggest that the odds are against them,” said Horan.