Actively managed exchange traded funds have been slow to match the phenomenal growth in passive index-based ETFs, but the active space has produce some interesting investment strategies.
Active bond ETFs have gotten a lot of attention lately, mostly due to PIMCO’s entrance into the space, notably the PIMCO Total Return ETF (NYSEArca: BOND) and the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT).
But there are some other popular active ETF strategies as well, including the WisdomTree Emerging Markets Local Debt Fund (NYSEArca: ELD), which provides attractive yields from emerging market debt securities. The ETF has a 5.15% 30-day SEC yield. ELD was the first active ETF to break the $1 billion in assets under management mark.
The AdvisorShares TrimTabs Float Shrink ETF (NYSEArca: TTFS) has also been a popular fund that tracks companies with stock buyback plans as a way to increase value. [Buyback ETF Thrashing the Market Up Nearly $1 Billion in 2013]
Investors can also capitalize on a down market with the AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE). Components are selected based on income statement, cash flow statement and balance sheets in an attempt to weed out companies with low earnings or suspect accounting practices, along with other qualitative analysis. [Investors Hedging with Active Bear ETF]
There are 62 actively managed U.S.-listed ETFs with $14.3 billion in assets under management. To put this in perspective, there are 1,500 U.S.-listed ETFs with $1.56 trillion in assets, according to XTF data.
Robert Goldsborough, an ETF analyst for Morningstar, believes active ETFs will gain greater acceptance from fund providers and their clients.
“We’re going to see more major, noted managers moving into actively managed ETF’s,” Goldsborough said in a New York Times article. “More investors and advisers are comfortable with ETF’s, investors believe in active management, and the ETF structure has a lot of benefits.”