“Average retail investors get fees comparable to institutional share prices for the ETFs’ sibling mutual funds,” he said.

Related: An Active ETF Strategy to Hone in on Quality Value Names

Active ETFs tend to issue lower fees than actively managed mutual funds because ETFs do not have to worry about record keeping for individual shareholders, the 12b-1 marketing fees or hiring transfer agencies. The average fee for actively managed funds hovered around 1.12%, whereas active ETFs come with an average 0.66% expense ratio.

“Investors are increasingly cost-focused,” Todd Rosenbluth, director of ETF and mutual fund research at CFRA, told Wealth Management. “In the equity space, active management has failed to consistently deliver outperformance, so investors are more hesitant than perhaps they should be to take a look at some of these products.”

Looking ahead, Johnson argued that fund managers will unlikely fully commit to actively managed ETFs until the Securities and Exchange Commission makes it harder for them to mask their underlying holdings or offer nontransparent funds to protect their secret sauce and prevent front running.

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

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