Actively Managed ETFs: Breakthrough or Likely Flop?

The SEC may soon issue recommendations allowing the first actively-managed ETF. John Spence of Dow Jones NewsWires reports that many industry insiders think actively-managed ETFs are a breakthrough for one of Wall Street's hottest investments.

But if they build it, will investors come? I don't think so. Actively managed funds aren't following an index, and thus, they do not have a track record to compare to. Actively managed ETFs will be looked at like any other new conventional mutual fund.

In addition, over 65% of ETF purchases are made by institutions and financial advisers who are looking for representation in certain asset classes, sectors, or global regions following a specific index. An actively managed ETF would not be attractive to these folks. So, I wouldn't be surprised if the opening of the first actively manged ETF will be the most anticipated flop of the year.

Comments

[Panskeptic]

What is it about ETFs that invite otherwise sensible people to lead with their chin? All we need is for this new ETF to sport good numbers for 6 months, and the word "flop" will be an unheard discouraging word. Guess Tom Lydon's been reading too much Dan Culloton.

2007 Feb 15 10:43 AM

[Javaharv]

What would be the difference between an actively managed ETF and a CE? Aren't CE oft times referred to as ETFs, at least by "ETFConnect.com"?

2007 Feb 17 11:08 AM