Quirky Working In These Active ETFs

July 10, 2017

Figure 2. Leading Active Sector ETFs' Performance

ETFExplainerFCG

For a larger view, please click on the image above.

 

Source: ETF.com, as of 6/30/2017

 

Granted, most of these ETFs are relatively new, with less than three years' track record, so it's impossible to say whether their outperformance will hold long term. (When it comes to active management, time is nobody's friend; research shows that over 15-year periods, 90% of active managers miss their benchmarks.)

Still, for now, these active managers are clearly doing something right.

But that's not the end of the story.

Big Alpha For Active MLP ETFs

Most flows into active sector ETFs concentrate into two funds: the First Trust North American Energy Infrastructure Fund (EMLP) and the InfraCap MLP ETF (AMZA).

Historically, active management has played a big role in commodities and commodity-adjacent assets like MLPs, because these markets can be frustratingly complex.  

"With any commodity-sensitive portfolio, active managers add value just by managing risk," said Ryan Issakainen, senior vice president and ETF Strategist for First Trust.

Although EMLP and AMZA are commonly lumped together, they're fairly different. For starters, EMLP is actually not an MLP fund. (Yes, the ticker threw us, too.)

 

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