The US has several actively managed ETFs (see here). However, in 2017 SEBI categorized ETFs as an index tracking product (see here).
Has this changed? Are there any actively managed ETFs in India, or do regulations forbid them?
Just curious, what advantages do you see in active ETF over Active MF?
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they’re exchange traded instead of being purchased from the AMC. all the benefits come from that. for example:
- buying/selling in the secondary market
- flexibility and control over buy/sell price
- no minimum investment amounts
- intraday trading, short selling
is there any difference in charges?
You have listed all generic advantage of ETF over MF, but I doubt this is very much useful in active MF.
I mean it makes sense to have a Nifty 50 ETF, which you can use for intraday trading or short selling because basically you want to trade in nifty 50 or short sell it.
But will it really be advantageous to do intraday trading or short selling in a ETF of 20 random stocks selected by a fund manager (which is also changing periodically)?
Again this is valid for an index ETF like nifty 50, where you exactly know what is price of index and decide at what price you want to enter or exit an ETF based on that.
If ETF had 20 random stock picked by a FM, is there really a way to know what price you are getting in is fair?
Also, frankly most ETF (except few) currently are struggling with market making and there is a huge gap between fair price and market price, an Actively managed ETF will have even bigger gap.
Seriously? I mean most MF have min investment of Rs. 500. How low you think an active ETF go? you still have to buy whole number of units so I doubt it can go very low
The biggest advantage is no Exit load (or lock in). All equity MF have at least 1% exit load if sold within 1 year.
Fair point
I accept not having an exit load is advantage, but remaining seems to be more of theoretical points.
And also, remember that exit load are not mandatory. funds still charges exit load for a reason.
If the same fund house are launching active ETF, they would cover that load by something else.
Same goes for min. investment size. If fund wants to keep min. investment as 5000, they can still do it in ETF by ensuring unit size is such that 1 unit cost more than 5K.
Just having an ETF does not change anything there.
Its not about my personal interest. I am just trying to understand what exactly are advantage to broad investor community.
Anyways, at least for now, SEBI does not seem to think that there are lot of advantages to allow this in India 