Trader Talk

Active Managed ETFs: They Are Coming, Really

First actively managed ETF coming next week (I think). As you know, Exchange Traded Funds (ETFs) are baskets of stocks tied to indices. Still, most mutual funds are actively managed, that is, they are not tied to indices and they have managers to make picks.

ETF fans have been waiting for actively managed ETFs to hit the market. The hope is that these actively managed funds will be at a cost lower than a comparable mutual fund and take more business away from mutual funds (it's still a pretty poor fight: ETFs have $568 billion under management, the mutual fund industry has about $11.7 trillion under management, according to Index Universe.)

We've been telling you that an actively managed ETF is just around the corner. We've been telling you that for...uh, months on end. What's taking so long? Regulatory issues. Don't ask for details, it's too depressing.

Well, it's finally happening, I think. Bear Stearns announced that their Current Yield Fund (YYY) will begin trading shortly. Really.

The YYY is a basket of short-term fixed income instruments:treasuries, municipals, corporate bonds. Fixed income professionals make the choice about what the "mix" will be. It's essentially an active money market fund, in a way, because they will be investing in short-term instruments.

What about the expense ratio? It's reportedly 0.35 percent, which is a little more than half what most retail money market funds will charge.

Bear Stearns says the product will begin trading March 18th on the AmEx, so it's coming. Really. There are other actively managed funds coming. From PowerShares. They told me. They’re coming. Really.

Questions?  Comments?