How Will Full-Function Actively Managed ETFs Work?
THE SEC CONCEPT RELEASE AND LIMITED-FUNCTION ACTIVELY MANAGED ETFs
By the late 1990s the dramatic success of the S&P 500 SPDR and strong receptions for other index ETFs led many fund developers to consider how this extraordinary portfolio instrument could deliver active portfolio management to investors. In 2001, the Securities and Exchange Commission published a Concept Release142
in which it summarized the issues that needed to be addressed before actively managed ETFs could be offered. The Concept Release asked four fundamental questions:
1. How are actively managed ETFs likely to be structured, managed, and operated?
2. How will investors use, and benefit from, actively managed ETFs?
3. Would the exemptive relief that the Commission has granted to index-based ETFs be appropriate for actively managed ETFs?
4. Are there any new regulatory concerns that might arise in connection with actively managed ETFs?
In addition to these four highlighted questions, about 40 additional questions were included in the text of the Concept Release. The Commission received 20 formal comments from individuals and organizations.143
Some of these comments addressed the issues raised in the Concept Release, some challenged the notion that an ETF could be actively managed and still be like the index ETF(s) the commenter knew and loved, and some commenters simply took the opportunity to discuss whatever was on their minds—whether or not it ...