Fund Managers Jump on the ETF Bandwagon

“If you have spent years as an asset manager explaining why the active approach is good, and why you are using an active approach, say you are a value or a high-conviction investor, for example, you will have to come out with a product that reflects that. There is absolutely the risk of hypocrisy here, so firms have to be very thoughtful about what they launch,” Li said.

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Consequently, many active managers who are stepping into ETFs are also exploring alternative index-based strategies or smart beta options that eschew traditional market capitalization-weighted methodologies for strategies that look more like actively managed styles.

“The ETF is just a wrapper. Often you have a plain vanilla or market-cap weighted index put into an ETF but you can put all different kinds of investment types into an ETF wrapper,” Lake added.

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