(November 24) – “Mutual-fund companies and stock exchanges in the U.S. have toiled for years to create the mother of all hybrids — a mutual fund run by a portfolio manager with shares that trade throughout the day like a stock,” write Aaron Lucchetti and Sara Calian in today’s Wall Street Jounal.

“The new hybrid would be like the exchange-traded funds based on indexes such as the Nasdaq 100 that are increasingly popular with U.S. investors. But it would go a step further because its shares would be based on changing fund portfolios run by active stock pickers, rather than on the static holdings in a market index.”

“Now, such a creature has come to life — in Germany.”

“Catching the U.S. fund industry flat-footed, Deutsche Bank AG this week launched trading on 11 actively managed mutual funds offered by its DWS asset-management unit, one of Europe’s largest mutual-fund companies. The new exchange-traded funds, or ETFs, allow investors in Germany and several other European countries to trade fund shares at continuously updated market prices during the day on the Deutsche Boerse in Frankfurt.”

” ‘The whole industry will be extremely interested in seeing how these things trade,’ said Kathleen Moriarty, a partner specializing in ETFs at New York law firm Carter, Ledyard & Milburn. If the new shares are well received in Frankfurt, they should add to momentum to get actively managed ETFs launched in the U.S., she said.”

“Many large fund firms including Fidelity Investments, Barclays Global Investors, State Street Global Advisors and Dreyfus Corp. have been studying such offerings. So has the American Stock Exchange, where officials were scurrying this week to learn how the new Frankfurt-traded ETFs work. ‘We’ve got people trying to figure this out,’ said Robert Rendine, an Amex spokesman.”

“But while investors from Berlin to Bavaria can scoop up freshly priced mutual-fund shares on the Frankfurt exchange, U.S. fund investors will have to wait a while. The new German shares aren’t available to U.S. investors, and regulators at the Securities and Exchange Commission are still unconvinced that actively managed ETFs can work in U.S. markets.”

“Even supporters pushing the introduction of the actively managed shares say it will take a year or more to win SEC approval for the new ETFs in the U.S. “I’d be flabbergasted” if anyone in the U.S. is able to launch an actively managed exchange traded fund before 2002, says Gary Gastineau, a former Amex official who now works on ETF products for Nuveen Investments, Chicago.”