Actively managed exchange traded funds are moving out of obscurity as investors become more educated on how the investment tool works and providers expand offerings.

State Street Global Advisor’s Chris Goolgasian on Morningstar explained that investors shouldn’t automatically associate ETFs with passive investments. Instead, people should look at ETFs as a type of wrapper that encloses a certain investment strategy, either passive or active in nature. [Active ETFs Pick Up Momentum]

“The ETF itself is just a wrapper,” Goolgasian said. “It doesn’t have to be associated with purely passive, just as mutual funds don’t have to be associated with purely active or passive. We’ve got plenty of active and passive mutual funds, and I think we’re going to have plenty of both in the ETF space, albeit that innovation is coming and growing.”

Goolgasian also likens ETFs to a glass cup where either vessel can be used to hold various contents.

“I think I would draw an example maybe back to when we took the SATs [in high school, and we had]to do those analogies,” Goolgasian added. “I would say, passive is to ETF, as what is to a glass? In my mind, the answer is not as specific as milk is to glass; it is liquid is to glass. We could put anything in that glass, and you could put anything in an ETF.”

Moreover, when comparing the ETF wrapper to the mutual fund wrapper, he points out that the investors benefit from a number of attributes only found in ETFs. For instance, ETFs post holdings daily, come with significantly lower costs, offer liquidity and provide intra-day trading.

For more information on active ETFs, visit our actively managed ETFs category.

Max Chen 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.