The latest trend in the actively managed ETF business has been for traditional mutual fund providers to file with The Securities and Exchange Commission for launching active ETFs. New strategies within the active ETF sector have cropped up, along with new providers showing interest in this sector. [Active International ETF Sports Impressive Performance]
As more providers try and grab market share of the active ETF business, it has become more important for investors to educate themselves on what defines an active ETF versus a passive fund. Active ETFs do not track an index, the stocks they hold are dictated by a manager. The fact that ETFs are transparent, meaning their holdings are revealed in real time, the possibility of front-running is an ongoing issue. Fund managers are also asking for permission to create active ETFs that hold derivatives, but regulatory hurdles are far from being resolved.
“Two relatively new and successful active ETFs listed in the U.S. by Pimco are the PIMCO Total Return ETF (NYSEArca: BOND) and the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT), with assets under management of $4.6 billion and $2.8 billion, respectively, at the end of the first quarter. These two ETFs account for 41% of all active ETF/ETP assets in the U.S.,” Fuhr wrote.
Tisha Guerrero contributed to this article.