Will We Soon See an Income-Distribution ETF?

by: Tom Lydon

ETF providers may soon introduce new income-oriented products to cover the rising needs of the retiring baby boomer generation.

The marketplace already offers fixed-income ETFs, but the industry may start to incorporate managed distribution or an income stream that flows to the investor without having to sell the ETF, writes David Hoffman for InvestmentNews. Experts believe the fund’s structure will help ease investors into retirement.

However, the development of actively managed ETFs still remains unsettled. The SEC requires ETFs to provide full transparency and this polemical issue has active managers irked.

Proponents of actively managed ETFs say it is only a matter of time before this ETF theme catches on because ETFs, unlike mutual funds, allow investors to pay capital gains taxes on the final sale of the investment.

Nevertheless, before actively managed ETFs can gain widespread acceptance, this ETF type will have to show that it can add value and it may take “three, four or five years to see what the real end story is with true active ETFs,” says Martha G. Papariello, a principal and head of the financial adviser services unit at The Vanguard Group Inc.

Max Chen contributed to this article.

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