This week's Barron's featured the Mutual Fund Quarterly (I guess the roundtable will be next week?) and there was one interesting article that talked about companies like T. Rowe Price (TROW) and Fidelity (FNF) getting into the ETF space with actively managed funds. The context seemed to be PIMCO's model where the Bond ETF is essentially a different class of the flagship Total Return fund (there are some differences under the hood).
Of particular interest from this article was speculation that Fidelity would create ETF versions of its sector funds. Back in the early 1990s, before the Sector SPDRs, I recall two companies dominating the sector fund niche; Fidelity and Invesco. I don't know if the Invesco funds are still around but the Fidelity funds definitely are still around.
The article gave the impression that the Fido sector funds do well when compared to passive sector funds. I would add that in some instances there are also sub-sector funds. The article mentioned a biotech fund and there is also the Fidelity Select Defense & Aerospace Fund (FSDAX) to name a couple.
I am a huge believer in narrow based funds. I think the best way to go with a portfolio is using mostly individual stocks but that is not going to be realistic for a lot of do-it-yourselfers often as a function of time available to spend on the task. Narrow based funds can serve as proxies for individual stock exposure or at least allow investors inclined to spend time learning about sectors and industries to get closer to an all stock (or mostly stock) portfolio.
There will of course be industries where a viable ETF (or mutual fund) will be a long shot. I am still a huge believer in Norwegian fisheries and Chinese toll roads but the fishery ETF failed and although there is a toll road ETF in registration it seems like a low probability for listing (despite a recent article elsewhere to the contrary).
Someone with the requisite time and interest could easily construct a portfolio with one or two sector funds for each sector and here there are domestic, foreign developed, emerging, niche and there are some country funds that can serve as sector proxies. From there they could pick an MLP (I am not a fan of the MLP ETPs), a specialty tech stock they know very well and an airport from somewhere as an example. This sort of portfolio is very accessible for someone with the time and inclination (repeated for emphasis) and a suite of actively managed sector and industry funds would simply give more choices to the person willing to put in this sort of effort into their portfolio.