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Active ETFs: Where Do They Stand?

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After years of relative calm, the VIX volatility index has been spiking above 20, a high reading, numerous times in the past few months.

Exactly what that signals remains unclear — though it is this very heightened uncertainty that often drives investors into the hands of professionals as opposed to passive market-linked indexes without a driver at the wheel.

Investors in ETFs — historically a domain dominated by passive investing vehicles — may therefore appreciate that there are more opportunities than ever for an actively managed approach, if they value the combination of ETFs’ flexible structure with a manager’s guidance.

That is one conclusion that jumps off the pages of a nifty year-end guide to active ETFs, produced by AdvisorShares. The actively managed ETF family is displaying its wares at ETF.com’s InsideETFs conference beginning Sunday.

And while the firm does not dominate the active space in terms of assets under management, it does run the largest number of individual funds, many of them in the alternative investing space — an area of interest to those looking for creative hedges.

Its Active ETF Report reflects significant growth in actively managed funds in the past year, with16.5% growth in AUM from $2.4 billion to $17.27 billion. The fund count expanded from 73 to now 125 active ETFs.

The news was not all rosy. Two active ETFs closed last year — Guggenheim Enhanced Bond (GIY) and Pimco Build America Bond Strategy (BABZ).

But 54 new funds were launched, including WBI Shares, whose 10 ETFs raised over $1.15 billion in assets, reflecting surging demand for tactical funds appealing to investors hoping to reduce portfolio volatility. The upstart firm now has 6.7% of active ETF market share.

The field’s dominant player in terms of AUM remains PIMCO with 39.6% of active ETF assets. While the percentage seems high, the fixed-income giant nearly owned the space as recently as a year ago, when its market share was 52%. Its scaled-down presence though does not appear to reflect declining interest in its funds — which grew in 2014 — so much as the asset-gathering activity of other funds.

In that regard, First Trust was the other big story last year, rising from a 4% market share to 12% today, reflecting surging interest in alternative products.

The First Trust North American Energy Infrastructure Fund (EMLP) tallied the highest AUM increase in 2014, rising by over $587 million. The MLP fund performed well last year, providing a nearly 20% return at a time when energy commodities were plunging.

The firm’s alternative-income heavy lineup also attracted assets, particularly the First Trust High Yield Long/Short ETF (HYLS) and its Enhanced Short Maturity ETF (FTSM).

The PowerShares Actively Managed Exchange-Traded Fund Trust (PHDG) drew the second highest asset increase, after EMLP, reflecting greater interest among investors in a downside hedge.

In terms of number of number of shares and strategies offered, AdvisorShares has the greatest representation, with 26 funds spanning nearly every fund category.

Three of those make the list of Top 20 funds, including its AdvisorShares Peritus High Yield ETF (HYLD); its AdvisorShares Newfleet Multi-Sector Income Fund (MINC), a short-term bond fund; and the AdvisorShares TrimTabs Float Shrink ETF (TTFS), a U.S. stock fund that invests in companies that repurchase their own shares.

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