Jack Brennan, chairman emeritus of The Vanguard Group, known for its low-cost index funds, recently echoed a common sentiment when he described actively managed ETFs as an oxymoron.

“One of the reasons you index is to take manager risk out of the equation. To put manager risk back into the equation makes no sense to me,” Brennan said at IndexUniverse’s InsideETFs conference in February.

Most people think of ETFs as vehicles built to track indexes passively, and for good reason. To date, that’s what 96 percent of them do. Even when passively managed ETFs follow reweighted or customized indexes, once the index’s rules have been established, the securities selection process is computer-driven and emotionless.

But with big-name fund sponsors like Fidelity and T. Rowe Price lining up at the Securities and Exchange Commission to get into the active space, this may be the year when the actively managed ETF segment finally takes off. Some regulatory hurdles have been cleared, including a moratorium on the use of derivatives, but others remain, such as concerns over front-running.

“The index licensing grab has largely played out,” says Luke Montgomery, an analyst at New York–based Sanford C. Bernstein & Co. As a result, he adds, “many ETF providers view active ETFs as an important new frontier for industry growth.”

Currently, there are 1,445 ETFs in the U.S. Just 58 of them, or 4 percent, are actively managed, and they hold less than 1 percent of the industry’s assets — 0.86 percent, to be precise — or $12.6 billion out of $1.46 trillion, Morningstar says. Of that total, $7 billion is concentrated in two successful fixed-income ETFs from Pacific Investment Management Co.: Total Return ETF (BOND), launched last February, with $4.3 billion in assets, and Enhanced Short Maturity ETF (MINT), introduced in 2009, with $2.7 billion in assets.

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