The Mutual Fund Industry Is Concerned About ETFs And Losing Business To Them

“By now, many investors are familiar with the index approach to exchange-traded funds, in which a single security seeks to capture the diversity of a broader swath of stocks. But a growing portion of action in ETFs are actively managed by an investing professional. In about two years, the number of actively managed ETFs has grown from the five launched in March and April 2008 to 17. During that time, their assets under management have climbed from about $16 million to $294 million, according to the Chicago-based National Stock Exchange,” Will Swarts Reports From SmartMoney.

Swarts goes on to say, “The latest hat in the ring belongs to JPMorgan Chase (JPM) – a titan whose size has sent a ripple through the young industry. On Wednesday, JPMorgan filed regulatory documents with the Securities and Exchange Commission to launch passively and actively managed ETFs. Some say the move signals a potential surge in these offerings as larger, well-known financial institutions seek a piece of the business.”

Because they cost less to own and may provide better tax benefits, ETFs – active and passively managed – are often touted as the next big thing for individual investors, and even in this early stage of the industry’s development, that’s a reasonable concern for the mutual fund industry, says Patrick Watson, a portfolio manager with Capital Cities Asset Management in Austin, Texas. “Most of the people in the mutual fund world, well, they’re not near panic yet, but they are concerned about ETFs and losing business to them,” he says.

Actively managed ETFs in particular could be poised for big growth, says David O’Leary, portfolio manager of the Invesco PowerShares Active Alpha Multi-Cap fund (PQZ) and the PowerShares Active Alpha Q fund (PQY). “If you look at first push into the ETF business, it went from zero to about $750 billion in index ETFs over 17 years,” he says. “I think a year from now, there will probably be 50 to 100 active ETFs.”

See The Full Story: HERE

Here are some details on the Invesco PowerShares Active Alpha Multi-Cap ETF (PQZ) and the PowerShares Active Alpha Q ETF (PQY) below:

The investment (PQZ) seeks long-term capital appreciation. The fund invests at least 95% of total assets in stocks in the Multi-Cap Universe (as defined below) selected by AER pursuant to a proprietary stock screening methodology, which utilizes fundamental and quantitative criteria.

TOP 10 HOLDINGS ( 24.62% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Atwood Oceanics, Inc. Common St (ATW) 2.31
CNinsure Inc. (CISG) 2.29
Cognizant Technology Solutions (CTSH) 2.73
CONSOL Energy Inc. Common Stock (CNX) 2.33
Hansen Natural Corporation (HANS) 2.81
LHC Group (LHCG) 2.46
Longtop Financial Technologies (LFT) 2.52
Pharmaceutical Companies Common (PRX) 2.38
RINO International Corporation (RINO) 2.27
Vistaprint NV (VPRT) 2.52

Chart for PowerShares Active Alpha Multi-Cap (PQZ)

The investment (PQY) seeks long-term capital appreciation. The fund invests at least 95% of total assets in NASDAQ-listed stocks selected by AER pursuant to a proprietary stock screening methodology, which utilizes fundamental and quantitative criteria.

TOP 10 HOLDINGS ( 26.20% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Bucyrus International, Inc. (BUCY) 2.8
Citrix Systems, Inc. (CTXS) 2.63
eBay Inc. (EBAY) 2.28
Life Technologies Corporation (LIFE) 2.54
Marvell Technology Group, Ltd. (MRVL) 2.98
Millicom International Cellular (MICC) 2.43
NetApp, Inc. (NTAP) 2.94
priceline.com Incorporated (PCLN) 2.52
DIRECTV (DTV) 2.43
Warner Chilcott plc (WCRX) 2.65

Chart for PowerShares Active AlphaQ (PQY)

Leave a Reply

Your email address will not be published. Required fields are marked *