Bonds are king when it comes to actively managed exchange-traded funds. According to data compiled by ETF provider AdvisorShares Investments, global bond funds wracked up more than $8.2 billion in assets through the end of April, or 58 percent of total assets in the active ETF space.
Foreign bond funds were the next largest category, with $2.7 billion in assets and more than 19 percent market share. The U.S. equity, global equity and foreign equity categories each had garnered less than one percent of market share.
“The bond side has done a better job staking its claim so far,” says Matthew Lemieux, senior research analyst at Lipper. “The equity side faces different pressures from different perspectives.”
One of the big stumbling blocks is that actively managed, traditional open-end funds are protective of their investment strategies and don’t want to expose their positions as required by ETF daily disclosure rules.
One company is trying to avoid that conundrum with an innovative fund structure. In March, Eaton Vance filed with the Securities and Exchange Commission to create an exchange-traded managed funds (ETMFs) structure designed to combine aspects of actively managed open-end mutual funds and ETFs. If approved, ETMFs would trade daily on securities exchanges but wouldn’t have to disclose their holdings daily.
Eaton Vance says it wants to launch a family of ETMFs that mirror existing Eaton Vance mutual funds and to license the underlying technology to other fund groups.
Another hinderance to active equity ETFs is that investors seem happy with passively managed, index-based equity ETFs. A growing number of fund companies are rolling out active equity-based ETFs with distinctive strategies designed to differentiate themselves from index-based funds, but investors aren’t piling in just yet.