Intelligent ETF
An exchange-traded fund (ETF) that employs some form of active investment strategy. These ETFs are often based on a broad index (such as the S&P 500) or a sector-based index, but they choose to exclude some stocks within the index while increasing/decreasing the percentage weighting of other stocks. Most intelligent ETFs carry higher expense ratios than standard ETFs, as well as substantially higher turnover ratios.
Also known as a "smart ETF" or "enhanced index fund". Investopedia Says:
The "intelligent" or "smart" ETF is a relatively new investment category, as many of the funds originated in the aftermath of the bear market period of 2000 to 2002. Most intelligent ETFs look to avoid market capitalization-weighted portfolios, instead using internal metrics (or black box systems) such as company fundamentals or share performance.
In truth, any ETF or index fund that does not replicate a base index exactly is not passively investing, meaning that the fund's returns could deviate markedly from the returns of the benchmark index. Some intelligent ETFs have internal or proprietary indexes that are merely replicated within the ETF, but this is still active investing, and many of the internal indexes cannot be readily examined. Related Terms:
Active Management
Black Box Model
Enhanced Index Fund - EIF
Exchange-Traded Fund - ETF
Expense Ratio
Leveraged ETF
Passive Investing
Relative Return |