Ever since the SEC changed its rules to allow sponsors to offer actively managed exchange traded funds in 2007, this asset class has been putting down roots. It reached almost $15 billion in assets at the end of October, according to Morningstar. While this is only a small fraction of the total $1.64 trillion ETF market, these products now offer advisors some interesting opportunities not available through either mutual funds, stock purchases, alternative asset classes or traditional indexed ETFs.
But as with any asset class, these funds have attracted their fair share of naysayers. They come with risks that experts say make them less attractive for both sponsors and investors than indexed ETFs.