Actively Managed ETFs Catching On in Unexpected Ways

by: Tom Lydon

Major names in the fund industry are finally embracing actively managed ETFs, but the role the funds seem to be settling in to may not be quite what was pictured.

Big-name fund providers are taking to active ETFs, launching several of them this year. But the role of active ETFs seems to have shifted into a more supporting one instead of the lead, says Ian Salisbury for The Wall Street Journal.

Salisbury notes that while the launches have been steady, the firms have avoided launching stock-picking funds, preferring instead to have active funds targeting commodities or Treasury Inflation-Protected Securities. Among the reasons:

  • Picking stocks simply isn’t what many of these firms do
  • The indexing industry doesn’t believe picking stocks adds value
  • Actively managed bond ETFs are catching on a little more quickly, in part because the first active ETFs appeared in spring 2008, not a heady time for the stock market
  • Year-to-date, investors have poured more than $40 billion into bond ETFs; $20 billion has exited stock funds

Firms that have recently rolled out active funds include BlackRock’s iShares, PIMCO and Vanguard.. PIMCO firmly believes in active management and appears committed to expanding its offerings. This space is going to get interesting in the next year as investors realize the benefits of active management in an ETF form, which include transparency and intraday liquidity – something mutual funds don’t offer.