The actively managed exchange traded fund space is dominated by a handful of players, but the industry could quickly expand if the Securities and Exchange Commission gives the greenlight for nontransparent ETF offerings.
PIMCO, First Trust Advisors, WisdomTree Investments and AdvisorShares Investments currently dominate the active ETF space, writes Rosalyn Retkwa for Institutional Investor.
There are now about 33 actively managed ETFs with $100 million or more in assets as of October 9, compared to just 18 in September 2013. The space was bolstered in August after WBI Investments joined the ETF fray in August, adding 10 new active ETFs. [Absolute Shares Joins ETF Fray With 10 New ETFs]
Over the same period, combined assets for the category increased 15.7% to $16.9 billion from $14.6 billion, even though gains were slightly offset by redemptions out of the PIMCO Total Return ETF (NYSEArca: BOND), which dipped to $2.7 billion in assets from $3.9 billion, in response to Bill Gross’ move to Janus. [Life After Gross: BOND Adjusts Portfolio]
The losses in the active ETF space were largely limited to BOND. For instance, the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) attracted net inflows after Gross left PIMCO and has become the largest active ETF on the market, with $3.8 billion in assets. [ETF Options to Hedge Against Falling Prices, Low Inflation]
On Oct. 9, Fidelity also launched its first suite of actively managed ETFs based off its mutual fund products, including Fidelity Total Bond ETF (NYSEArca: FBND), Fidelity Limited Term Bond ETF (NYSEArca: FLTB) and Fidelity Corporate Bond ETF (NYSEArca: FCOR). [Fidelity Makes Its Active ETF Debut and it Could be a Big One]
The active ETFs help provide investors with a relatively cheaper way to access active management styles that could potentially capitalize on market inefficiencies. For instance, the First Trust Global Tactical Commodity Strategy Fund (NasdaqGM: FTGC), while still lower this year, has outperformed broad commodity indices due to the active ETF’s lower tilt toward energy. [A Beacon of Light Among Commodities ETFs]
Currently, there are 115 actively managed ETFs, with $16.7 billion in assets under management and an average expense ratio of 0.85%, according to XTF data.
Looking ahead, the SEC is still mulling over nontransparent active ETF filings. However, Robert Goldsborough, an analyst at Morningstar, believes the regulatory body could come to a decision in the next few weeks, citing industry sources.
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.