THE RACE TO

launch the first actively managed exchange-traded fund has come to an end. And an unlikely victor crossed the finish line first:

Bear Stearns

When the investment bank announced its startling acquisition by J.P. Morgan just over a week ago, many ETF industry veterans thought the Bear Stearns Current Yield ETF, which was originally set to launch March 18, would be in a perpetual holding pattern. But Bear Stearns Asset Management, a subsidiary that runs $30.5 billion, announced Current Yield started trading Tuesday on the American Stock Exchange under the ticker YYY. According to a press release, when the acquisition is finalized the ETF will be re-branded under the J.P. Morgan name.

PowerShares and Vanguard were also in the hunt to launch their own actively managed ETFs. PowerShares could possibly debut three equity ETFs and one fixed-income offering early next month. A Vanguard spokesperson couldn't comment on when that company would start trading a quartet of fixed-income ETFs that are based on sister mutual funds.

The ETF industry, says Tom Lydon, editor of online newsletter ETF Trends, was happy to see the launch. But, he adds, "we just wish the sponsor was in a better financial situation."

Current Yield is the first offering to combine the strengths of a fund manager with the trading flexibility of an ETF. Up until now ETFs passively tracked an index or other benchmark. Current Yield will invest in a range of government securities and fixed-income products with the goal of beating the returns of a money-market fund. It will also change hands throughout the day like a stock. According to the fund's prospectus, Current Yield will charge $35 for every $10,000 invested.

"Our approach is to maximize income for our investors, while preserving capital," said Scott Pavlak, the ETF's senior portfolio manager, in a press release. "The fund employs a disciplined investment strategy, adding value through sector allocation, security selection, yield-curve positioning and duration management."

The fund's launch is certain to draw attention from investors. ETFs have been consistently siphoning away assets from the mutual fund world. As of February, 633 ETFs held $557 billion. That's an increase from the $151 billion that sat in 119 ETFs just five years ago, according to the Investment Company Institute. Though still a tiny sliver of the $11.7 trillion invested in traditional mutual funds, the ETF industry is growing at a much faster pace.

The advent of actively managed ETFs is supposed to strip away one of the last differentiating features between the two camps: a seasoned stock picker at the helm. The argument goes these ETFs will be able to brag they post above-average returns, charge reasonable fees for that performance and advisors can get in and out of them quickly since they trade all day. Of course, all those attributes are on paper. None of these funds have withstood real-world market conditions.

That, ultimately, is what could be the deciding factor in the success of these new-fangled funds. If they do wind up delivering on the hype, they could steal away money that could've gone to funds that charge high fees or are experiencing a spat of poor performance. Of course, they could also succumb to market conditions like their competitors and find themselves lost in the shuffle with an ever-expanding roster of funds.

"[These funds] are going to have to show some [good performance] to attract money," says Lydon, the newsletter editor. If that happens, he says, actively managed ETFs could take off. "I can see some familiar names throwing their hats in the ring."