Brace yourself for more ‘active ETFs’

Article Excerpt

Most ETFs now available to investors are passive funds that aim to track overall markets or other rules-based indexes. We prefer that strategy, which helps to keep the fees you pay low. However, some investors still prefer actively managed portfolios, where portfolio managers apply their analytical skills in the hopes of beating the broad markets. Active managers have been reluctant to use conventional ETF structures. Right now, fund managers need to disclose the full details of their portfolio holdings daily. But that level of disclosure would allow other traders to replicate their strategies on an ongoing basis. In Canada, there’s a growing number of active ETFs already approved by regulators and now trading on the public markets. These active ETFs are governed under the same laws as most mutual funds. That requires them to disclose their portfolios on a monthly or quarterly basis. In the U.S., where actively managed ETF are rare, the Securities and Exchange Commission recently gave asset managers, including…

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