Actively Managed ETFs

Actively managed exchange traded funds are still a drop in the bucket in terms of overall ETF assets.

However, a major obstacle that has limited the proliferation of actively managed ETFs was lifted recently. The ability to use derivatives in actively managed ETFs was once restricted, but the Securities and Exchange Commission has removed this moratorium, reports Gil Weinreich for Advisor One.

“The likely outcome of the lifting of the ban on the use of derivatives in actively managed ETFs is that we’ll see new types of ETFs entering the marketplace and an expansion of the types of strategies used by ETFs,” Richard Morris, asset management attorny said. “The change may prompt asset managers that may have been on the sidelines to enter the market.”

Investopedia reported on its top five actively managed ETF picks, based on overall popularity with investors.

  1. PIMCO Total Return ETF (NYSEArca: BOND) After about one year trading, BOND has become the most successful and popular actively managed ETF. The ETF has around $4 billion in assets under management and costs a reasonable 0.55%, pretty low for active management.
  2. PIMCO Enhanced Short Maturity Strategy ETF (NYSEArca: MINT) This fund has about $3 billion  in assets and costs a low 0.35%. However, the yield is under 1% due to the short duration of the bonds in the portfolio. This is a highly liquid way to access the fixed-income, short-term portion of the yield curve,  reported Investopedia. [Short Duration Bond ETFs Eye Money Fund Reform]
  3. WisdomTree Global Corporate Bond (NasdaqGM: GLCB) This ETF invests in global corporate debt and “seeks to provide total returns consisting of income and capital appreciation”. The fund has $7 million in assets and costs 0.45%. Keep in mind this fund has just recently launched. [Emerging Market Bond ETFs to Consider]
  4. Huntington U.S. Equity Strategy (NYSEArca: HUSE) has assets under $10 million since it launched in July 2012. The fund shifts in and out of different sector in the S&P Composite 1500. The 0.95% expense ratio makes this one of the more expensive funds.
  5. First Trust Northern American Energy Infrastructure Fund (NYSEArca: EMLP) Since the June 2012 launch, the fund has amassed $190 million. The yield is higher in this ETF since it invests in MLPs, which have higher yields than stocks and bonds. The 0.95% expense ratio has not stopped yield-hungry investors from buying EMLP.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.