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PowerShares Capital Management won the race to file the first-ever prospectus for an actively managed equity-based exchange-traded fund (ETF) in late November. AER Advisors, an affiliate of the New Hampshire-based stock-research company Alpha Equity Research, will manage the funds. The initial filing covers three equity funds and one fixed-income fund: The PowerShares Active AlphaQ Fund, which will invest in 40 NASDAQ stocks chosen using a quantitative screening mechanism; the PowerShares Active Alpha Multi-Cap Fund, which will hold 50 U.S. large-cap stocks chosen using a quantitative screening mechanism; the PowerShares Active Mega-Cap Portfolio, which will hold 50 ''megacap'' U.S. stocks chosen using a truly active screening methodology; and the PowerShares Active Low-Duration Portfolio, a bond fund that aims to outperform the Lehman Brothers 1-3 Year U.S. Treasury Index.
There is no word yet on listing venues or expense ratios. Various firms have been trying to launch actively managed ETFs for more than six years, but all have encountered a variety of stumbling blocks. The biggest issue has been figuring out how to disclose the contents of the portfolio without allowing others to ''front-run'' trades that the manager is making. The PowerShares filing features a lag between the execution of trades and the disclosure of the portfolio. In one sense, these funds represent only a partial step toward active management; most of them use quant-driven strategies. However, none of them are tied to a benchmark, which is a break from ETFs of the past. Since the PowerShares filing, at least two other firms have filed for actively managed equity ETFs: Grail Advisors and AdvisorShares. More filings are expected soon. There is no word on when the funds will launch, or on which fund will launch first. |
