Will Vanguard be the first fund firm across the finish line with an actively-managed, exchange-traded fund? It may be, reports the WSJ's Fund Track column Monday morning.

In February, Vanguard was the second fund firm to file plans for an active bond ETF with the SEC. Bear Stearns has also filed with the SEC to create an actively-managed, fixed-income ETF.

While the Bear Stearns fund will function somewhat like a money market fund, Vanguard's offering promises to be a true bond fund. It will take the form of a new share class in the $9.9 billion Vanguard Inflation-Protected Securities Fund, if approved by the SEC.

The problem with actively managed ETFs has been how to manage the basket of stocks used in the creation unit that is in turn used to arbitrage the discount or premium in the market. In an actively traded fund, institutional investors and arbitrageurs lack information around which to trade those units.

The thinkers at Vanguard propose that rather than disclose all of the fund's holdings, they instead disclose a sample of its holdings that duplicate 50 percent to 75 percent of the holdings. The fund invests in 20 or so Treasury Inflation Protected Securities (TIPS) at any one time.

That makes the solution far simpler than for an active equity fund that could invest in hundreds of securities.

Typically, innovative securities, a category that would include an actively managed ETF, take more time to work through the SEC staff. A company with the resources of Vanguard may also have more resources to work the filing through the SEC.

Vanguard is the third largest provider of ETFs, behind Barclays (BGI) and State Street (SSgA). 

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