Actively managed exchange-traded funds (ETFs) can be confusing. Many people assume that an ETF inherently means a fund that passively follows an index. That is, after all, what the vast majority of them do. And more to the point, that’s how they’re usually marketed: Since most investment managers can’t consistently beat the market, why not simply “buy the market?” And the fact that there is no active manager means that a passive ETF can be offered cheaply.
But there’s nothing inherent in the term “exchange-traded fund” that stipulates passive investing. It just has to trade on an exchange. You can, in fact, structure a fund as an ETF and have an active manager picking the stocks or bonds.
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