Traditionally, exchange traded funds (ETFs) have been used as a passive investing tool, or as a way for investors who are not willing to actively manage a portfolio to engage in the “do it yourself” (DIY) trend.
With rock-bottom fees, buying an ETF which tracks an index is one way to limit spending on management fees, which for some mutual funds or actively managed portfolios can be significant.
The rise of the actively managed ETF has turned the investment management industry on its head. With many actively managed mutual funds now offering shares of such funds with lower and lower management expense ratios (MERs), the reality is that the fact that investors now have access to actively managed ETFs for less than 1% MER (some much lower than that), the ability for hedge funds or mutual funds to obtain net cash inflows is limited to old-fashioned investors who would like to have someone to talk to about their investments.
With DIY trends likely to continue over time, I expect to see the popularity of actively managed ETFs to continue to rise.
Canadian investors have a wide range of actively managed ETFs available today, with the number of new actively managed ETFs increasing rapidly.
The advice many money managers have, and advice I would echo, is to buy into funds backed by proven firms with large institutional backing. Having an actively managed ETF could prove to be a very prudent move as markets move downward and stock picking becomes more important.Invest wisely, my friends.