ETFs get active in 2012

Big changes on the horizon in ETF space.

December 28, 2011

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bike rider(Source: Benefits Canada) If your New Year’s resolution is get more active in 2012, then you have something in common with the rapidly growing ETF industry. Although active ETFs have failed to gain much traction in the past few years, some industry watchers say that this about to change. There are currently 800 active ETFs waiting in the wings, as they seek SEC approval in the U.S. At the same time, many existing managers are quickly expanding their active ETF menus.

But the biggest sign of the times has to be PIMCO’s effort to become the first money manager to create an ETF version of its flagship Total Return fund – one of the biggest mutual funds in the world. This could just be a game changer for the ETF industry – and it’s a glimpse of how the ETF world could look in the coming years as they put the squeeze on the costlier mutual fund space.

Other new forms of actively managed ETFs are also in the works. BlackRock has submitted an application with the SEC to allow them to offer actively managed ETFs that don’t divulge holdings daily. And SSgA is seeking to offer active strategies that are essentially ETFs composed of other ETFs, in the same vein as fund of funds strategies.

These developments show how quickly the ETF space is changing as providers look to provide products that cannibalize the far more established mutual fund space.

Of course a key barrier in 2012 could be regulatory holdups – regulators are already wary of the ETF space and they could take some extra time to kick the tires of these new products. Time will tell – at least the year ahead definitely promises to be interesting.

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