Are there actively managed ETFs?

Actively managed exchange-traded funds (ETFs) haven't yet been approved by the SEC, although several have been proposed and the agency is evaluating them.

Most mutual funds today are actively managed: a human fund manager picks a portfolio of stocks that can change at any time, without fully disclosing their current holdings (and therefore their strategy).

By contrast, all ETFs are based on indexes (how indexes work): fully-publicized sets of holdings that change less frequently.

The challenge in developing actively managed ETFs is that for the ETF redemption mechanism to work (more), the exact holdings of the fund must be known to the market at all times, which would compromise the active manager's strategy.

Whether actively-managed funds win SEC approval or not, many newer ETFs are already starting to resemble actively managed funds in some ways. As the number and variety of ETF indexes grows, they are becoming more creative and sophisticated, and incorporating more proprietary portfolio strategy.