Why invest in Actively Managed ETFs?
When an ETF is managed by an individual or a team of managers who take proactive portfolio allocation decisions to optimize investment returns, it is called an active ETF. Such ETF’s may also track an underlying benchmark index, however the returns may not mirror the investment returns of the index. Actively managed ETFs are the closest in structure to Mutual funds.
Unlike Mutual funds that only declare their holdings on a periodic basis, ETFs are required to declare their holdings on a daily basis. This creates several disadvantages for an actively managed ETF, including having to give away its daily trading strategies ( that often comes from expensive research and analysis) and also incur administrative costs for accurately declaring changes to its portfolio composition on a daily and sometimes intra-day basis.
As of now (2015) less than 1% of the total listed ETF assets in the US is in actively managed ETF’s. Moreover, 8/10 of the largest actively managed ETF’s are Bond funds.
Key Indicators to consider before Investing
- Interest Rate
Top 10 ETF’s by Market Capitalization
|Name of the Fund||Ticker Symbol /Total AUM*||Year of Inception||Expense Ratio|
|Pimco Enhanced Short Maturity Strategy||MINT||11/16/2009||0.35%|
|SPDR DoubleLine Total Return Tactical||TOTL||02/23/2015||0.55%|
|iShares Short Maturity Bond||NEAR||09/25/2013||0.25%|
|Pimco Total Return Active||BOND||02/29/2012||0.55%|
|First Trust Preferred Securities & Income||FPE||02/11/2013||0.85%|
|First Trust North American Energy Infrastructure||EMLP||06/20/2012||0.95%|
|Goldman Sachs ActiveBeta U.S. Large Cap Equity||GSLC||09/17/2015||0.09%|
|SPDR Blackstone / GSO Senior Loan||SRLN||04/03/2013||0.70%|
|First Trust Tactical High Yield||HYLS||02/25/2013||1.11%|
|First Trust Senior Loan||FTSL||05/1/2013||0.86%|