From bonds to stocks to commodities, these five active ETFs are standing out this year.
The ETF market is predominantly passively managed—of the 1,570 U.S.-listed ETFs today, only 84 are actively managed, with combined assets of around $15 billion.
Still, several active ETFs hold their own against passive funds, and some of the best performers are actually beating their indexed counterparts so far this year.
Below we list the five best-performing active ETFs so far in 2014, in ascending order.
BABZ invests in taxable municipal bonds publicly issued under the Build America Bond program. The portfolio of 33 securities is heavily allocated to revenue bonds and underweights general obligation issues, according to ETF.com Analytics.
Year-to-date, BABZ has seen returns of 4.4 percent, making it the fifth-best-performing active ETF.
But it’s worth pointing out that a similar index-based strategy, the PowerShares Build America Bond ETF (BAB| B-61), has now seen gains of 5 percent in the same period. What’s more, Pimco’s BABZ delivers slightly lower yield-to-maturity of 4.8 percent compared with BAB’s 5.5 percent. But it serves up lower sensitivity to interest rates.
“At 45 basis points, BABZ is fairly costly, but it’s the trading costs that investors should be aware of,” ETF.com Analytics says of the ETF. “The fund trades less than $200,000 on most days, with average spreads of 28 basis points—nowhere near liquid.”
The 33-holding bond fund, which came to market in September 2010, is currently delivering a 30-day SEC yield of 4.22 percent. The portfolio has an effective duration of 10.28 years and effective maturity of 19.25 years. BABZ has $20 million in assets under management.