ETF Update: Actively Managed ETFs, and ETFs of ETFs

by: Tom Lydon

Active ETFs Gaining a Tepid Response So Far

After all that talk, actively managed ETFs are so far bringing passiveness from investors now that they're here.

Ian Salisbury for the Wall Street Journal reports that these funds, after years of anticipation and back-and-forth with the Securities and Exchange Commission, haven't gathered assets as quickly as other new ETF launches have in the past.

Bear Stearns Current Yield (YYY), which launched in March as the first such ETF, has $50 million in assets. WisdomTree's new line of six currency and current income-oriented funds, most of which hit last week, have about $120 million in total. Invesco PowerShares' line of four has about $11 million total.

It seems that investors are waiting to see how these ETFs perform before they dive in. They could want to watch them build a track record and get to know the managers behind them first, and many might want three or five years of returns before they'll consider stepping in. "Back tested" results can't really be applied with these funds the way they can with those that track an index.

Among the actively managed ETFs now available:

  • PowerShares Active Low Duration Fund (NYSEARCA:PLK)
  • PowerShares Active Mega Cap Fund (NYSEARCA:PMA)
  • PowerShares Active Alpha Q Fund (NYSE:PQY)
  • PowerShares Active Alpha Multi-Cap Fund (NYSE:PQZ)
  • WisdomTree Dreyfus Chinese Yuan Fund (NYSEARCA:CYB)
  • WisdomTree Dreyfus Indian Rupee Fund (NYSEARCA:ICN)
  • WisdomTree Dreyfus Brazilian Real Fund (NYSEARCA:BZF)
  • WisdomTree Dreyfus Euro Fund (NYSEARCA:EU)

PowerShares Launches Line of ETFs of ETFs

PowerShares has broken some new ground in the ETF industry with its launch of the first line of ETFs of ETFs in the United States.

The new funds are:

  • PowerShares Autonomic Growth NFA Global Asset Portfolio (NYSEARCA:PTO): The most growth-oriented of the three funds, with 90% equity and 10% fixed income.
  • PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (NYSEARCA:PAO): Holds 75% equity and 25% fixed income.
  • PowerShares Autonomic Balanced NFA Global Asset Portfolio (NYSEARCA:PCA): Holds 60% equity and 40% fixed income.

The ETFs primarily hold PowerShares ETFs, but will also contain some from other providers as well, reports Heather Bell for Index Universe. Although the actual expense ratio for each individual fund is low, at 0.25%, the expense ratios for each ETF within the fund are applied on top of that.

This type of investment could appeal to those investors who don't want to watch their portfolios too closely, yet still want some level of control while having someone else manage their ETFs. With just one of these ETFs, they would be automatically diversified. Bell says these ETFs could also get a lot of attention if ETFs ever gain full acceptance in the 401(k) market.

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