Actively Managed ETFs

What are Actively Managed ETFs?


Actively Managed ETFs allow individual traders to have access to active capital management through a liquid marketplace where they can readily sell their shares.  Actively managed ETFs have a fund manager that makes buy and sell decisions on securities within the fund and aims to achieve a return greater than a standard money market account.  Being just released in 2008, there are very few actively managed ETFs on the market which will prevent many investors from participating due to the lack of historical data.

The one key disadvantage that many traders see to actively managed ETFs is the lack of transparency.  Most of these ETFs disclose their holdings data at the end of the day.  This creates a larger disparity between the NAV of the ETF and the market value.  Fund managers don't particularily believe in full disclosure as it allows other traders to piggyback off their moves and even worse, allows other institutions to artificially drive prices up when the fund is trying to sell a position and visa versa when they are trying to buy a position.

Secondly, actively managed funds will have higher expense ratio's; thereby, dropping their effective yield and making index ETFs more attractive.

What do Actively Managed ETFs Invest In?


Fund managers will leverage all types of securities, including stocks and fixed income investments such as municipal bonds, corporate bonds, government bonds, and other forms of short term debt. 
<< Part 1:  Introduction to ETFs
<< Part 2:  Leveraged ETFs
<< Part 3:  ETF Discounts and Premiums
Tim Ord
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