What is an Actively Managed Exchange Traded Fund (AMETF)?

An Actively Managed Exchange Traded Fund (AMETF) is a type of investment fund that combines the best of two worlds: the ease and flexibility of ETFs and the hands-on approach of actively managed unit trusts. While passive ETFs simply track an index, AMETFs have professional fund managers actively deciding which assets to buy, hold, or sell, aiming to beat the market or meet specific investment objectives.The first AMETF was launched in the US in 2008, offering investors something new - a fund that trades like an ETF but benefits from active management. Since then, AMETFs have slowly but steadily gained popularity as more people look for flexible investment options that can adapt to changing markets.

Fast forward to today, and AMETFs are exploding in the South African investment landscape. Investors are drawn to the idea of blending active management with the flexibility of ETFs. This is especially appealing in times of market uncertainty or when investing in specific themes, like tech or renewable energy, where a hands-on approach and manager expertise might make a big difference.

Why You Might Consider Investing in AMETFs

Here are some reasons why AMETFs could be worth adding to your portfolio:

1. Active Management: You get the benefit of professional fund managers keeping an eye on the market and adjusting the fund’s holdings as needed.
2. Flexible Trading: Like passive ETFs, you can buy and sell AMETFs throughout the day, unlike unit trusts, which only price once at the end of the day.
3. Diversification: AMETFs still offer the usual diversification of ETFs, but with the added benefit of active managers shifting things around based on what’s happening in the market.
4. Potential for Higher Returns: Because the fund managers are actively trying to beat the market, there's a chance of getting better returns than you would with a passive ETF. Of course, this comes with the risk that the fund could underperform as well.
5. Cost-Effective Active Management: AMETFs tend to have lower fees than traditional actively managed unit trusts, giving you active management without the high costs.

Things to Keep in Mind

AMETFs come with their own set of risks. There’s no guarantee the managers will beat the market, and they tend to have higher fees than passive ETFs. But for investors who want more flexibility and professional oversight, AMETFs can be a good middle ground.

AMETFs offer a unique investment opportunity, combining the flexibility and cost-efficiency of ETFs with the potential for higher returns through active management.