An actively-managed ETF is an exchange trade fund that is managed by a single or team of fund managers.
An actively-managed ETF uses a professional portfolio manager who selects the securities to be included based on the investment strategy.
- Ability to react to changing markets
- Discretionary money management
- Investment strategies that seek to out perform index benchmarks
Historically, actively-managed investment strategies have been most easily accessible through mutual funds. Today investors can utilize the same types of investment strategies and professional money management with all of the features that ETFs provide, including:
- Tax efficiency
The combination of active management and the ETF features provide investors an innovative new solution to manage their investment strategy to achieve their investment goals.
ETFs were first introduced in the early 1990s in the United States and Canada and over the ensuing years the number of ETFs traded worldwide and the value of their assets under management have increased substantially.
ETFs are now a global product tracking the performance of broad-based equity indices, sector specific indexes and other asset classes such as fixed income, metals and commodities.
Actively managed ETFs are new investment vehicles that will allow investors to participate in an actively managed portfolio strategy that could range from tactical to traditional asset allocation and from sophisticated currency strategies to emerging markets.
ETFS vs Mutual Funds
The table below summarizes the key structure of Actively managed ETFs vs traditional ETFs and mutual funds.
|Feature||Active ETF||Index ETF||Mutual Fund|
|Ability to Produce Alpha||YES||NO||MAYBE|
*ETFs are, however, subject to commission costs each time you buy or sell.
<strong>What is an exchange-traded fund (ETF)?</strong>
An exchange-traded fund (ETF) is a pooled investment fund whose shares are traded on an exchange. ETFs are bought and sold by a broker. In the U.S., ETFs can be found on the NYSE, or the NASDAQ.
<strong>How can I buy or sell ETFs?</strong>
ETFs are listed with ticker symbols in the same way as individual stocks. They can be bought or sold throughout the day by a full service or discount broker. A brokerage commission to buy or sell will usually apply.
<strong>How long have ETFs been trading and available for investors to purchase?</strong>
ETFs were first introduced in the early 1990s in the United States and Canada and over the ensuing years the number of ETFs traded worldwide and the value of their assets under management have increased substantially. ETFs are now a global product category tracking the performance of broad-based equity indexes, sector specific equity indexes and are used to invest in other asset classes such as fixed income, currencies and commodities. More recently, active managers have been using ETFs as a platform to reach investors nationally.
<strong>How many ETFs are currently trading?</strong>
There are currently more than 1,500 individual ETFs available to purchase & trade on U.S. exchanges.
<strong>How is an ETF different from a mutual fund?</strong>
ETFs offer investors intraday liquidity and can be bought and sold with a brokerage account. Mutual funds are priced at the end of the day and cannot be bought or sold during regular trading hours. Also, ETFs are traded on a stock exchange, whereas mutual funds are bought and sold directly with the fund company or through a mutual fund trading platform.
<strong>Can ETFs be sold short?</strong>
Yes. One of the potential advantages of ETFs is that they trade on an exchange similar to equities and if available may be sold short.
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An investment in the Funds is subject to risk, including the possible loss of principal amount invested. The risks associated with each Fund include the risks associated with the underlying ETFs, which can result in higher volatility, and are detailed in each Fund’s prospectus and on each Fund’s webpage.