Actively Managed ETFs are One Step Closer
Written by DR
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Last week the SEC issued a notice that gave near final approval to Invesco Ltd.’s PowerShares Capital Management unit to issue actively managed ETFs. You can read the SEC release (pdf file), but here are the details and how it changes the investing landscape.
Actively Managed ETFs
Just to review, an ETF today tracks an index, much like an index mutual fund does. But unlike an open-end mutual fund, an ETF trades on an exchange like individual stocks. Unlike a mutual fund, an ETF can be bought on margin and traded throughout the day. It is generally more expensive to buy an ETF due to commissions and the bid/ask spread, but there are no redemption penalties that come with some mutual funds, expense ratios generally are lower, and ETFs tend to be more tax efficient. You can read read Rick Ferri’s article about ETFs vs. mutual funds for more information.
