The actively managed exchange traded fund space only makes up a fraction of the overall industry, but active ETFs are finally beginning to catch investors’ eyes.
Of the 87 ETFs launched this year, active funds made up 19% of the new new assets, reports Eric Balchunas for Bloomberg. Active ETFs are seeing greater interest, especially after the highly successful launch of the PIMCO Total Return Bond ETF (NYSEArca: BOND), which attracted $4 billion in assets in a little over a year.
Mutual fund giants like Franklin Templeton are positioning to jump into the ETF industry. [Franklin Templeton Readying First Foray into ETFs]
BlackRock iShares also recently filed to launch a suite of actively managed foreign currency-related ETFs. [iShares Crafts Actively Managed Currency ETFs]
There are 61 actively managed U.S.-listed ETFs with $14.3 billion in assets, compared to almost 1,500 U.S.-listed ETFs on the market with $1.5 billion in assets, according to XTF data.
In comparing active ETFs with mutual funds, the ETF structure provides better tax efficiency, transparency and intra-day liquidity.
Actively managed ETFs are also cheaper than comparable mutual funds, but the active ETFs are also more costly than traditional beta-index ETFs. The average expense ratio on active ETFs is 0.95%, compared to 0.62% for the overall ETF industry.
Next page: New actively managed ETFs
Balchunas points out five popular actively managed ETF strategies launched this year:
SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN). Investors have sought out senior bank loan related investments to generate high yields with floating rates as a way to hedge against a rising rate environment. SRNL has a 2.8% yield and a 0.90% expense ratio. [2013 Could be the Year of the Bank Loan ETF]
Cambria Shareholder Yield ETF (NYSEArca: SYLD). This strategy follows that shareholder yield should also include stock buybacks and paying down debt, along with how much a company gives back to shareholders. The active ETF includes 100 companies with attractive shareholder yield and equally weights the portfolio. SYLD has a 0.59% expense ratio. [All The Good Stuff in One Yield ETF]
PIMCO Foreign Currency Strategy ETF (NYSEArca: FORX). This ETF tracks non-U.S. dollar currencies, with large weights toward the Canadian dollar, Norwegian krone, Swedish krona, Russia ruble and Brazilian real. FORX has a 0.65% expense ratio. [Currency ETFs for Diversification]
AdvisorShares Athena International Bear ETF (NYSEArca: HDGI). The bear strategy seeks out “low conviction” stocks in international markets to short, or bet against. HDGI has a 2.0% expense ratio. [AdvisorShares Readies International Bear ETF]
First Trust Preferred Securities and Income Fund (NYSEArca: FPE). Active managers seek out preferred securities to help generate yield. The asset is a type of hybrid stock that provides steady income like a bond. However, the securities are sensitive to rising interest rates. FPE has a 0.85% expense ratio. [High-Yield Preferred ETFs Stabilize After Downdraft]
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.