B. Actively Managed ETFs

Why invest in Actively Managed ETFs?

Overview

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.

Challenges

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.

Performance

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%

 

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