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Posted by on Sep 22, 2009 in Active Management, AdvisorShares

Having your cake and eating it too.

Having your cake and eating it too.

I have come to the conclusion that the ETF market place is the same market place as when plates were first invented (I mean those things you serve food on).  I would imagine when the first plate was invented, people were so happy.  They had something to use to put the fruit they picked.  They would set the plate on the table (I believe the table was invented a few years before the plate), and people were happy.  One day a forward thinking family in their preparation for dinner, made a cake for dessert.  One of their youngest children decided to take a knife (which was invented many years before the table), and cut the cake into pieces and served them on a plate.  The whole family starred in amazement.  This plate thing had only been used for fruit.  Everyone was so comfortable with holding their cake in their hands; the idea of putting that piece of cake on the plate was different and unusual.  Eventually word got around town that the family was using their plates to hold cake, people didn’t understand at first, but then they realized the convenience of putting that piece of cake on the plate.  They could still hold it in their hand if they wanted to, but for some people the plate worked perfectly.

ETFs are not the exclusive domain of passive index-based strategies.  I understand there have been limitations from a regulatory perspective, but those limitations have changed and will continue to evolve.  ETFs are a unique structure to deliver a pooled investment.  Similar to separate accounts, mutual funds, and private funds (hedge funds).  Each is a structure that allows for a multitude of investment strategies and pricing options.  As a financial professional, you pick the right structure, pricing and strategy for your clients.  If you prefer to select from active management, you have several structures to choose from.  If you prefer passive management, you also have several structures to choose from.  Innovation and forward thinking will continue to drive better choices for financial professionals and their clients.

The AlphaBaskets blog provides frequent market insight and commentary by AdvisorShares Investments, LLC, created by AdvisorShares and other leading active managers.  AdvisorShares Investments is an SEC-registered investment adviser and the investment adviser to the AdvisorShares actively managed ETFs. The views expressed on AlphaBaskets should not be taken as investment advice or a recommendation for any of the actively managed ETFs advised by AdvisorShares.