In his recent New York Times article, “It’s a New Genre, but Not Yet a Craze”, Conrad de Aenlle discusses the weaker than expected demand for actively managed ETFs.
According to Gary Gastineau, an ETF consultant, an ETF specializing in equities can be run for about half the cost of the same portfolio held in a mutual fund. This savings typically amounts to 75 cents a year for every $100 of assets. Active ETF advocates also mention liquidity and increased transparency as major reasons why they prefer ETFs over other investment vehicles.
Jeff Ptak, director of ETF research at Morningstar, believes active ETFs should be cheaper and more tax-efficient than mutual funds. However, according to Mr. Ptak, the daily reporting requirements may slow the growth of actively managed exchange traded funds. He thinks top managers may be reluctant to open their books every day and cites this as reasons actively traded ETFs haven’t been able to attract marquee names.
Overall, growth of actively traded ETFs have been less than originally anticipated. Mr. Ptak’s theory is that ETFs have not been able to define emphatically, why they are better than other investment vehicles. Until that happens, growth is going to be slow.
You can read the entire article here.