The actively managed exchange traded fund space, once pushed to the side, is now attracting a greater following, especially in the wake of highly successful PIMCO Total Return ETF (BOND) launch. Now, State Street Global Advisors is testing the waters with its first active ETFs.
These new actively managed ETFs will serve as fund-of-funds - these new offerings will hold a variety of ETFs from various fund providers. The active managers will evaluate the expected returns and risks of each underlying asset class, or ETF holdings. Accordingly, weightings of the individual ETF components will change, along with the manager's expectations.
"I can see active ETFs being a larger part of the ETF landscape," James Ross, senior managing director of State Street Global Advisors, said in a Bloomberg News story. "We obviously plan to participate in that growing market."
Actively managed ETFs differ from traditional, passive index ETFs in that a manager constantly monitors the active ETF. Passive ETFs try to reflect the performance of a benchmark index as closely as possible.
RLY holds ETFs that follow securities related to commodities, inflation protection, real estate and natural resource companies. For instance, the top expected holdings are SPDR S&P Global Natural Resources (GNR) 25%, PowerShares DB Commodity Index Tracking (DBC) 20% and SPDR Barclays Capital TIPs (IPE) 15%. RLY has an expense ratio of 0.70%.
INKM holds ETFs that track yield producing assets like convertible bonds, debt securities, global equities, preferred stocks and real estate securities. Top expected holdings include SPDR S&P Dividend (SDY) 15%, SPDR Dow Jones Global Real Estate (RWO) 10% and SPDR Barclays Long Treasury (TLO) 10%. INKM has an expense ratio of 0.70%.
GAL will try to provide capital appreciation through ETFs that will provide a balanced exposure to global debt and equities. Top expected holdings include SPDR World ex-U.S. (GWL) 20%, SPDR S&P 500 (SPY) 19% and SPDR Barclays Aggregate Bond ETFs (AGG) 15%. GAL has an expense ratio of 0.35%.
"In providing a convenient, cost effective vehicle for investors and financial advisors to benefit from SSgA's experience in global tactical asset allocation, our actively managed ETFs are an innovative addition to the SPDR ETF family," Ross said in a press release.
"Our actively managed ETFs take advantage of a wide range of underlying asset classes to provide broadly diversified, global portfolios with a time tested, tactical allocation process that adds value by capturing new market opportunities," Dan Farley, senior managing director and chief investment officer for SSgA's ISG, said in the press release.
Max Chen contributed to this article.
Disclosure: I am long SPY. Tom Lydon's clients own SPY.