MutualFundWire.com: What You Need to Ask About the Rise of Active ETFs

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Tuesday, June 10, 2014

What You Need to Ask About the Rise of Active ETFs

It looks like the SEC may bless a number of active ETF models sooner rather than later, according to Morningstar via SeekingAlpha.

Instead of slaving ETFs to passive indexes, these models, allegedly, will allow active managers to work their magic in a vehicle that is traded like a stock.

There are actually a number of major firms chomping at the bit for this new idea to come to pass: State Street; BlackRock; Vanguard; Eaton Vance, and T. Rowe Price.

Analyst Robert Goldsborough outlines beautifully many of the technical and regulatory issues, as well as many of the technical and regulatory ramifications, of a proliferation of active ETFs.

It is all well done in this article, but there are other questions that need to be asked by fundsters.

For example, what impact could these products have on the distribution model of the fund industry?

Consider again this simple fact, these are funds that can be traded like stocks easily on an exchange. There is no need for these fund firms to fight to get on various gatekeeper platforms or select lists, what have you.

If active ETFs were ever to catch fire, would there still be a need for fund wholesalers and national account managers as we know them?

Could this mean the end for those who carry the bag?

Of course, most of these models have yet to garner SEC approval -- only a few have received exemptive relief. SEC regulators could decide to slow down, indefinitely, any particular approvals.

Even if these models garner approval, they might not succeed.

But some are slowly growing, consider AdvisorShares. How they do may be a harbinger for the future of the industry.

Printed from: MFWire.com/story.asp?s=48735

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