Saw Capital finally gave in and launched an active ETF: https://www.bloomberg.com/news/articles/2022-02-2…
Curious to hear people’s thoughts. Why have so many of these failed (TROW, Fido)? Why is Capital now giving this a go (late to the game)? Is this middle ground (~40bps) fee structure compelling? Is this just a “let’s cannibalize ourselves before someone else does” play?
Source that actively managed ETFs have failed at other asset managers? That's not true, at least to my knowledge; this is a relatively new shift for most large managers, and it's too early to see whether it'll stick IMO.
EDIT: Just saw that the Bloomberg article says that active ETFs at some firms have "struggled to gain traction," which I think you were referring to
“Struggled” may have been a better word. Fido’s Magellan ETF is a good example - only $50mm of AUM despite the big brand
Magellan’s also been out of favor, which could explain why. Their blue chip growth etf has 10x the AUM, probably because its mutual fund counterpart has been outperforming. I think an etf’s success is strategy and fund-dependent rather than firm-dependent. Whether or not Cap’s etfs will work out is up to the performance of their investments
The primary difference between an actively managed ETF and an actively managed fund is liquidity. Because they're traded on the secondary market (and not purchased / redeemed via the fund family) they can use more tools like leverage to boost alpha. Unlike passive ETFs that are simulating indexes, they can both predict and react to market circumstances (secular and cyclical). So this really comes down to their internal research resources. Using this research, they'll also invest in some more exotic or under the radar themes, so again, are they good at that.
My guess is if their funds have a hard time keeping up, so will their active ETFs. The flip side would also apply.
You really don't know what we can do with "passive" funds. The big issue with going active is that you can't show a backtest. If you don't have a track record that's expected. Rockstar active managers also want to convince you they have some secret sauce--it's generally not true, somebody with less name dropping restrictions will mention that small Florida firm we're thinking of, but that's why ANTs have become a thing.
Can active ETFs use the asset exchange loophole that Vanguard ETFs do to avoid cap gains distributions? If so it seems like a no brainer since they're a more tax-efficient product.
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