While still a small segment of the growing exchange traded fund universe, actively managed strategies could support the ETF industry’s next growth spurt.
A recent SEI (Nasdaq: SEIC) white paper, The Rise of Active Management in ETFs, outlines the shift in the actively managed ETF space and how new regulatory guidance and increased interest among traditional mutual fund providers could help support growth.
ETFs are “simply a wrapper, a structure (similar to a mutual fund) around an investment philosophy, process and portfolio of holdings, but with investor demand increasing and regulatory guidance improving, opportunities exist for actively managed ETFs to explode,” according to the white paper.
Active ETFs, with about $16 billion in assets, currently make up less than 1% of the $1.86 trillion U.S. ETF industry. Additionally, many actively managed ETFs mainly cover fixed-income strategies. For instance, the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) is the largest active ETF offering, with $3.8 billion in assets, followed by PIMCO Total Return (NYSEArca: BOND) $3.4 billion and AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD) $1.1 billion.
However, activity is stirring as more providers file with the SEC. The recent wave of active ETF interest are testing new regulatory waters as asset managers seek out non-transparent offerings as a way to protect their secret sauce and mitigate the effects of front running in the highly transparent ETF structure.
Earlier this year, the New York Stock Exchange’s part company asked the SEC for permission to list non-transparent active ETFs, and Nasdaq’s parent company followed suit a few weeks later, seeking to list and trade Eaton Vance’s proposed products. Now, we play the waiting game, with the SEC’s division of markets and trading scrutinizing the requests. [Waiting on the SEC to Approve Non-Transparent Active ETFs]
For more information on active ETFs, visit our actively managed ETFs category.
For a complete copy of the white paper on active ETFs, visit SEI’s Knowledge Center Archive.
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.