Bear Stearns has filed with the Securities and Exchange Commission to offer an actively managed exchange-traded fund that would invest in money market funds and short-term fixed-income obligations, The Wall Street Journal reports. The latter would include U.S. government securities, U.S. and foreign bank obligations, corporate debt obligations and other income instruments.
The fund’s goal would be to exceed the going money market fund rate.
“Unlike an index fund, which seeks to achieve, as closely as practicable, the total return of the securities comprising a specified market index,” the filing states, “the fund will be actively managed by its portfolio manager.”
The SEC has yet to approve any proposal thus far for an actively managed ETF, as one of the main problems is disclosing holdings in an ETF since active managers don’t want others to trade on their holdings ahead of them. But disclosing short-term fixed-income holdings isn’t so much of a problem since they are more tied to the Treasury market than to individual securities, said Joe Keenan, managing director at Bank of New York, which would act as the fund’s administrator.
Yet, Keenan also sees the formula as one that would work for other asset classes. “If Bear Stearns is effective at managing the fund, I think you have to assume they would take the structure into other asset classes,” he said.