Passive ETF

What is ‘Passive ETF’

One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific benchmark, such as a SPDR. Unlike actively managed ETFs, passive ETFs are not managed by a fund manager on a daily basis.

Explaining ‘Passive ETF’

Passive ETFs are similar to unit investment trusts (UITs) in that their portfolios are reset at regular intervals. They do not generate internal capital gains like actively-managed funds. However, they differ from UITs in that they can be bought and sold on an intraday basis. Passive ETFs will typically have much lower fees than those associated with their actively-managed counterparts.

Further Reading

  • The shift from active to passive investing: potential risks to financial stability? – papers.ssrn.com [PDF]
  • Exchange-traded funds 101 for economists – www.aeaweb.org [PDF]
  • From performativity to political economy: index investing, ETFs and asset manager capitalism – www.tandfonline.com [PDF]
  • Active vs. passive management: New evidence from exchange traded funds – papers.ssrn.com [PDF]
  • Hidden power of the Big Three? Passive index funds, re-concentration of corporate ownership, and new financial risk – www.cambridge.org [PDF]
  • Active versus passive investing: an empirical study on the US and European mutual funds and ETFs – www.emerald.com [PDF]
  • The implications of passive investing for securities markets – papers.ssrn.com [PDF]
  • Predictable patterns in ETFs' return and tracking error – www.emerald.com [PDF]