by Anna Prior

PROPONENTS OF so-called active exchange-traded funds say the products—where a manager, not an index, decides what securities to buy and sell—could revolutionize investing. But, at least so far, that revolution has barely started.
Several prominent mutual fund firms told government regulators during the past year that they were getting into the active-ETF business, but the firms—which include Legg Mason, T. Rowe Price and Eaton Vance—still haven’t launched the new products. Indeed, even some of the asset managers themselves appear to be questioning whether they really want to jump into active ETFs. In March, Eaton Vance, which operates 92 mutual funds, filed plans to launch five actively managed bond ETFs. Now the company is reevaluating the “business opportunity in the active-ETF space,” says Robyn Tice, an Eaton Vance spokesperson. Legg Mason and T. Rowe also confirm they were evaluating their ETF options.

It’s making some experts question when actively managed ETFs will take off, if ever. There are only 20 active ETFs on the market now, with about $900 million invested in them—a drop in the bucket compared with the more than $850 billion in almost 1,000 ordinary ETFs. The delayed revolution, however, might not be a bad thing for investors, some pros say. Other investment products, such as target-date mutual funds, came out in droves right away, and investors threw money into them without really knowing how well they would perform in a bad market (as it turned out, in the case of target-date funds, not very well). “As we’ve seen in the last couple of years, the capital markets revealed some flaws at unfortunate times. It’s definitely worth a delay to uncover these issues now,” says Jeff Tjornehoj, a senior research analyst at mutual fund–research firm Lipper.