Active ETFs Might Be The Answer

Courtesy of John Nyaradi

Let’s face it: most of us are fed up with the constant volatility and danger that presents itself in the markets every day.

In the “good ol’ days,” one could simply “buy and hold,” mutual funds were a sure way to make money over time, and bonds were the “oh-so-pretty” safe haven if things got messy.

But, we live in a different world now, and investors are typically torn between the need to make money and the fear to roll the dice.  Perhaps it would be easier to simply buy something, and then have it managed for you, without the regulatory red tape of an RIA or money manager.

Introducing Actively Managed ETFs:

As we also all know, ETFs offer investors diversification (like a mutual fund), while also allowing investors to trade these instruments (like a stock).  Actively managed ETFs (AMETFs) are a recent addition to the New York Stock Exchange repertoire, and since their introduction in 2008, AMETFs have proven able to combine the ETF equity concept with active management.

Although they were slow to gather assets and gain consumer confidence in the beginning, as of now, there are thirty nine AMETFs on the market, covering asset classes including equities, bonds, and currencies.

As mentioned earlier, AMETFs could provide investors the very thing they need: a relatively safe investment that is actively managed so that someone else deals with all the stress of today’s markets.

An AMETF Snapshot:

1. PowerShares Active Multi-Cap Fund (PQZ).  (PQZ) tracks the S&P 500 Index and has over $10,866,800 in assets, and was launched in 2008.  It is one of the first AMETFs the market.  (PQZ) trades nearly 100% stocks and currently has a net asset value of $27.17.
2. Guggenheim Enhanced Ultra-Short Bond ETF (GSY).  (GSY) tracks the Guggenheim 1-3 Month Treasury Bill Index, and was conceptualized in 2008.  (GSY) has over $14 million in assets.  (GSY) also trades nearly 100% stocks and has a $49.78 net asset value.  To learn more about bond ETFs, check out PIMCO’s Bond ETFs.
   
3. WisdomTree Dreyfus Commodity Currency Fund (CCX).  (CCX) has $81,895,480 in assets, was created in September of 2010, and has a net asset value of $27.30.  WisdomTree currently is the sole issuer of all currency related actively managed ETFs, and they cover multiple currencies including Chinese Yuan, Brazilian Real, Indian Rupees, Euro dollars, Japanese Yen, Emerging Markets Currencies, South African Rand, and New Zealand dollars.

So, the above three AMETFs could provide investors with another approach to navigating the volatile markets that we have all been fighting for the last three years.

ETFs continue to innovate and offer investors the best of many worlds because they trade like stocks but offer diversification like mutual funds.  But if you’re tired of the wear and tear of managing your own portfolio, Actively Managed ETFs can offer you the flexibility, power and tax advantages of exchange traded funds combined with the potential power of an actively managed asset.  Now, you can let a professional manager deal with the stress of managing your ETF portfolio, and in today’s rocky markets, all in all, that could turn out to be a good bet, indeed.

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