ETF Update: Actively Managed, Egypt ETFs, February ETF Report, Portfolio Spring Cleaning, SEC Approvals

Getting Ready For Actively Managed ETFs

Now that actively managed exchange traded funds are just around the bend, investors can expect a slew of filings.

State Street Global Advisors filed an application with the SEC last Wednesday for a series of actively managed target-date ETFs, reports BusinessWire.

The funds will invest in a diversified sampling of equity and fixed-income ETFs.

If this line of funds gets the go-ahead from the SEC, it will join PowerShares' newly-approved set of active funds, which are aiming for an April launch.

Invest Like An Egyptian

Egypt's first ETF is receiving a thumbs-up from Morgan Stanley. The ETF is viewed as an attraction for foreign institutional investors, looking for safer havens during the global credit crunch. Local investors will be lured by the big-cap equities ETF as well.

Wael Gamal for Reuters reports that Egyp'ts bourse is planning on launching an ETF based on the CASE 30 index. Stock and index futures with options are planned with the goal of doubling the current daily trading volume at $150 million to $180 million over the next few years. The ETF will be an aid to local investors, too.

February ETF Report

February was another volatile month for the markets and ETFs. The Dow Jones industrial average lost 1.4%, while the S&P 500 was down 1.9% and the Nasdaq dropped 3.3%.

The metals and agriculture ETFs bucked the general market trends to rise an average of 15%. As oil topped $100 per barrel this month, it was no surprise that the oil-related ETFs were some of the top performers. These ETFs gained about 11.5%.

Global markets on average fared better than our domestic markets, with many of the single-country ETFs ending the month on a positive note.

Click here to view the full ETF performance report.

Portfolio Spring Cleaning

If you feel spring in the air, it may be time to do some seasonal cleaning for your overall portfolio, including ETFs.

Does it appear your portfolio has taken a beating so far in 2008? Ron DeLegge for ETFGuide says it is possible you have overdosed on low-octane, under performing stocks.

In the past year, there have been some stocks on a real losing streak. If you're still sitting on those stocks, DeLegge suggests giving ETFs a look instead to minimize and spread out the damage.

While individual companies come and go all the time, most sectors remain alive and well. Instead of hanging on to those underperformers, get rid of them and replace them with a corresponding sector ETF if you still want to maintain that exposure.

It's a good reminder, too, to keep your emotions out of the game when it comes to investing. If your holdings aren't doing what they should, it's time to let them go and find something that works for you. Perhaps even establish an exit strategy you can stick to in order to keep your portfolio clean year-round.

Streamlining SEC Approvals

The ETF approval process could become streamlined, thanks to moves by the SEC.

We caught up with John McGuire, partner at Morgan, Lewis & Bockius LLP, and he weighed in with his thoughts about the changes.

The SEC is making these changes largely because of demand from ETF sponsors to speed up the process and as the funds become increasingly popular. Typically, the ETF approval process involved staff at the SEC subjecting a fund to a review, resulting in approvals on a case-by-case basis, report Kara Scannell and Diya Gullapalli for the Wall Street Journal. The new rule would eliminate the need to obtain specific relief.

"The ultimate short cut is to adopt a rule that permits ETFs without the need for obtaining and SEC exemptive order," McGuire says. "I do think that the success of ETFs has led to a large backlog of exemptive orders."

The changes don't necessarily mean that ETFs won't go through less scrutiny before they land in the marketplace. But McGuire says that "ETF sponsors won't have to go through this exemptive process, but there will still be scrutiny as the ETFs go through the registration process."

The changes aren't in place yet, though, and any changes may not be immediately apparent. After the SEC makes its proposal, there will be a period for public comment. The Commission will then analyze that input and make a decision based on that. "The new rule will likely impact those sponsors seeking to get in the ETF business in 2009 or later," says McGuire. It could also affect providers already in the business who are looking to add to their ETF lineups.

If the new rules go into effect, McGuire says it could free up staff to focus on new products that don't fit the current models, and it will also make it easier for fund groups to enter the ETF business. "Either of these things could lead to more, and more innovative, ETFs."

The meeting at which the SEC will make its recommendations for the new rules will take place on Tuesday.