ETFs With Hands-On Managers

These exchange-traded funds do more than track indexes.

It sounds like a contradiction: exchange-traded funds that buy and sell investments picked by managers instead of tracking an index. But more than two dozen actively managed ETFs are now available, and that's just the beginning.

Firms large and small are getting on the bandwagon. Well-known ETF sponsors, such as iShares, PowerShares and WisdomTree, offer actively managed ETFs. Bond behemoth Pimco has three active bond ETFs, with more in the works. Prominent mutual fund companies, including John Hancock, Legg Mason and T. Rowe Price, have registered with regulators to develop such funds, holding open the possibility that some of the best and brightest minds in the fund industry may one day be picking stocks and bonds for ETFs.

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Contributing Editor, Kiplinger's Personal Finance