Precidian, based in Bedminster, N.J., also has filed with the SEC to launch its own active ETFs. None of the above-mentioned applications have been approved yet.

Comparable Early-Stage Growth

“People are always asking when are active ETFs going to take off. Well, they’re taking off,” says Noah Hamman, founder and CEO of AdvisorShares. “People forget that index ETFs started slow during the industry’s first handful of years, but have grown tremendously since.”

Indeed, a chart provided by AdvisorShares shows very similar growth patterns between index and active ETFs during each camp’s respective first six years of existence (the first active ETFs began trading in 2008).

Among the current roster of active ETF providers, AdvisorShares’ 26 active ETFs leads the pack by a country mile. The company sponsors active managers with distinctive strategies across a range of asset classes. Among them are funds based on behavioral finance, business cycles, accounting red flags and volatility.

“Smaller companies like AdvisorShares need products that stand out because coming out with just another stylebox fund won’t generate a lot of interest,” Hamman says. “I do think some of the bigger, well-known firms can build more traditional active products and people will be more open to them because they’re more familiar with that brand.”

Perhaps, but it remains to be seen if established mutual fund companies will ever fully participate in the active ETF space.

“At the end of the day it [rolling out active ETFs] would cannibalize their existing core mutual fund business," says Lipper’s Barry Fennell. “The core product lineup of big fund shops have much higher total expense fee ratios that generate a lot of revenue, so it doesn’t make sense from a business point of view to offer low-cost ETFs with an active twist unless they feel the need to maintain market share or other business reasons.”

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