Europe likely to tryout active ETFs

The first active exchange traded funds might be introduced in the United States within the next three to six months, according to sources close to negotiations between the Securities and Exchange Commission and Bear Stearns Asset Management Inc. of New York.
MAY 02, 2007
The first active exchange traded funds might be introduced in the United States within the next three to six months, according to sources close to negotiations between the Securities and Exchange Commission and Bear Stearns Asset Management Inc. of New York. Since Bear Stearns filed a prospectus in March to launch YYY Trust, which will actively invest in money market and short-term fixed-income obligations, ETF managers have been keeping a close eye on the developments. If approved, it will be the company’s first ETF, as well as the nation’s first active ETF, potentially opening a door for others to introduce what could be one of the most important new investment tools in years. But the Bear Stearns ETF is still relatively limited and doesn’t adequately confront some of the stickier issues associated with actively managed ETFs — for example, how to provide added value with proprietary stock-picking skills and still be completely transparent under current regulatory requirements. Instead, some argue, Europe might be a more apt place to test the waters. A main reason is that regulatory requirements are less stringent, making it easier to introduce new ways of structuring ETFs, managers said. “Europe is catching up rapidly and in some ways passing the U.S.” in ETF innovations, said Greg Ehret, senior managing director and London-based European head of sales and distribution at State Street Global Advisors of Boston.

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