Doubts Expressed About Active ETFs

As the Securities and Exchange Commission moves ever-closer to fully approving the first actively managed exchange-traded funds, some experts predict a cool reception. Tom Lydon, president of Global Trends Investments and editor of ETFTrends.com, said the new breed of ETFs will not catch on because many ETF investors do their own asset allocation and use ETFs because they are cheap ways to track indexes. He said institutional investors and hedge funds in particular will likely shun the new offerings.

Lydon also predicted that this year more ETFs will pop up on global exchanges and in 401(k) plans.

Stephen Hammers, chief investment officer at Compass Efficient Model Portfolios, said ETFs will gain popularity with various types of investors. He said in the Yale University endowment fund, six of the top 10 holdings are ETFs.