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Active ETFs to Branch Into Alternative Strategies


In the relatively new exchange traded fund industry, the nascent actively managed ETF space is just beginning to expand, and investors should expect more options as money managers try to edge into mutual fund territory with a cheaper investment wrapper.

Investors will see more actively managed ETFs that cover target income, commodities, emerging markets, managed futures, hedged products and other alternatives, reports Margo Epprecht for On Wall Street.

“The theme as of late is ‘all things different,’” Noah Hamman, founder and CEO of AdvisorShares, said in the article.

The active ETF space is currently dominated by fixed-income options, such as the PIMCO Total Return ETF (BOND) , an ETF adaptation of PIMCO’s flagship Total Return Fund. BOND has $3.5 billion in assets under management.

The rising rate environment caused some investors to seek out fixed-income alternatives. For instance, the newly launched SPDR Blackstone/GSO Senior Loan ETF (SRLN) provides access to high-yield senior floating rate bank loans that helps mitigate the negative effects of rising rates. SRNL has gathered $592 million in assets. [What Active Senior Loan ETFs Bring to the Table]

While active equity ETFs provide lower fees, compared to similar mutual funds, equity investment options have been slow to launch.

The performance history has been a large factor in gauging active funds’ staying power, and many of the newer active ETFs have not had enough time to establish a record.

Additionally, actively managed ETFs are required to disclose holdings on a daily basis, which has discouraged some managers from launching an active ETF of their own and revealing their secret sauce.

However, some assets, like actively managed futures, have deep liquidity and pull from a wide array of securities, making the strategy harder for most traders to replicate. For example, the WisdomTree Managed Futures Strategy Fund (WDTI) utilizes a combination of U.S. treasury futures, currency futures, non-deliverable currency forwards, commodity futures, commodity swaps, U.S. government and money market securities. [Control Portfolio Risk with Managed Futures ETFs]

For more information on active ETFs, visit our actively managed ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.