What are ‘active’ ETFs – MoneyWeek

ActiveETFs,ontheotherhand,offerabetonsomeone’sfundmanagementskillsinanETFformat。

ThePimcofundhasnoindexbenchmarktotrack;itsstatedobjectiveistogenerateyieldforinvestors,whilepreservingcapitalandofferingliquidity。

TheETFalsohasanamedfundmanager–MikeAmeyofPimco–whosetrackrecordyoucancheck。

WhycombineactivefundmanagementandETFsinthisway?

Basically,low-costETFshavethrownabombshellintothecosyworldofhigh-feefunds,withswathesofmoneyswitchingfromtraditionalmanagedfundsintopassivetrackers。

Somanyactivefundmanagers–suchasPimco–areseekingto‘ETF-ise’theirfundranges。

Interestingly,otheractivefundmanagers–SchrodersandJPMorgan,forexample–havemadedifferentmoves,introducinglow-costactivefundswithoutseekingtoaddtheintradaytradeabilitythatETFspromise。

Andhere’sthecatch。

SinceanactiveETFreportsitsmanager’sactivitywithaday’slag,it’strickyforthefund’smarketmakerstokeepbid-offerspreadstight(sincetheydon’tknowexactlywhat’sinthefundatanygiventime)。

ThatmeansyouriskpayingmorewhenbuyingandsellingtheETFthanyououghtto。

Intime,activeETFsmaywellcomewiththeoptionforretailinvestorstotradeinandoutatnetassetvalue,ratherthanincurringdealingspreads。

Whentheydo,thefundsmaybeworthalook。

Butuntilthen,we’dsteerclear。



PaulAmeryedits

www。

indexuniverse。

eu


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