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Banking

New Entrant Plots Actively Managed ETFs

A new exchange-traded fund firm has filed with the Securities and Exchange Commission for two ETFs that will use active management.

The funds will be asset allocation ETFs, with underlying ETFs that will be allocated as the manager sees fit--effectively active management of a suite of ETFs. The ETFs will be managed by AdvisorShares, a startup launched by Noah Hamman, a former executive at Rydex Investments.

The filing is for two ETFs, the Sector Allocation Fund and Country Allocation Fund. The funds will be managed by a subadvisor, though neither subadvisors nor fees are listed in the filing.

The filing is not the first public registration for an actively managed ETF. Bear Stearns was among the first, filing for an actively managed fixed-income fund in March (www.fundaction.com, 3/20). What makes the AdvisorShares filing stand out among such filings is that the active management involves buying and selling other ETFs rather than the underlying stocks. This diminishes the problem of front-running, which is a concern for other firms looking to launch actively managed ETFs but reluctant to reveal their stock purchases in real time.

Hamman, who was at Rydex from 2001-2005 and helped launch that firm's ETF line, declined to comment on the funds, citing SEC filing rules. But he did say that the concept could be applied to a wide range of offerings, including international/global and currency.

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