Since debuting about a year ago, exchange-traded funds that are actively managed have gotten off to a slow start.
The first folded after seven months. Those currently on the market from Invesco PowerShares have performed relatively well, but market turmoil, a narrow track record and investors’ unfamiliarity with the concept of actively managed ETFs have kept assets low.
“I don’t think the market is ready for it just yet,” said Ronald Rowland, the president of Capital Cities Asset Management Inc. in Austin.
The first actively managed ETF, the Bear Stearns Current Yield fund, debuted in March of last year but closed in the fall after failing to attract enough investors. Such funds had been anticipated for years as an important rival to mutual funds. If they can deliver the same range of returns as mutual funds, their additional advantages would include lower fees and taxes, as well as more flexibility and transparency.
Invesco PowerShares launched four funds in April of last year and another one in November. At the end of January the funds had $14.6 million of assets under management. Other ETFs, from advisers and sponsors such as Invesco PowerShares, Grail Advisors LLC, American Beacon Advisors Inc. and State Street Corp., are awaiting approval from the Securities and Exchange Commission.
Rowland said the four PowerShares launched in April of last year are on the ETF “death watch” list he maintains online. The list includes funds with low average daily trading volumes and average daily values traded.
He acknowledged that big backers like Invesco PowerShares can support funds through a long lean period if necessary.
Ed McRedmond, senior vice president of portfolio strategies at Invesco PowerShares, acknowledged that its funds have modest asset levels so far, but he said the situation is not much worse than anticipated. “We wouldn’t say we’re thrilled” about the asset levels, “but it also wouldn’t be way out of our expectations.”
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