An Update on the Performance of Actively Managed ETFs

Document Type

Article

Publication Date

2014

Publication Title

Journal of Index Investing

First Page

10

Last Page

18

DOI

http://dx.doi.org/10.3905/jii.2014.4.4.010

Abstract

Actively managed ETFs are a relatively recent introduction to the investing landscape, and understanding their performance against passive funds is becoming increasingly important. Consistent with preliminary studies, I find that active funds are more volatile than their passive counterparts and do not provide an absolute return advantage. Thus, active ETFs are generally not good substitutes for existing passively managed funds. However, in contrast to prior studies, I find that performance metrics based on relative risk (e.g., Information and Treynor ratios) suggest that active funds may be good additions to existing portfolios for their diversification benefits. I also find that these relative benefits are primarily concentrated in the funds with the highest average daily trading volume.

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Version of record can be found through Institutional Investor Journals.

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