I'm Kyle DeTullio. I'm the ETF capital markets specialist here at Thrivent Asset Management.

Exchange traded funds, or ETFs, are pooled investment vehicles that generally hold a collection of stocks, bonds or other securities, similarly to mutual funds. And just like mutual funds, ETFs come in many different styles and can help with diversification in client portfolios.

However, there are several key differences between ETFs and mutual funds. Notably, ETFs offer intraday liquidity as they can be traded at any time during the trading day, whereas mutual funds are limited to trading at their net asset value after markets have closed.

Also, the way ETFs are structured can lead to greater tax efficiency compared to similar strategies offered in the mutual fund wrapper. Often, ETFs can also be used to help lower costs to clients.

So, the real key to the ETF structure and its tax efficiency comes from the way that ETF shares are created and redeemed. Unlike mutual funds which typically exchange cash for shares, ETFs take in or deliver out the underlying securities in-kind. This in-kind creation-redemption mechanism can lead to fewer realized gains within the ETF’s portfolio, which can translate to lower capital gains distributions for clients.

Now, investors can incur capital gains when they sell their ETF shares. But in-kind creation redemption means that they are not impacted as they would be in a mutual fund by other investors selling their ETF shares.

Most notably, ETFs do not charge sales loads or 12b-1 fees. Additionally, most major brokerages no longer charge commissions on ETF trades, which has further reduced the total cost of ETF ownership.

Passive ETFs are designed to follow the structure of a specified index. But actively managed ETFs are not constrained by predetermined rules of an index. Generally, they have a goal of outperforming a specified market index or other benchmark. As such, active ETFs can benefit from the ability to be more dynamic to changing markets. At Thrivent Asset Management, we have more than 140 investment professionals researching various asset classes.

Our fund managers are constantly using this research to evaluate portfolio exposures as market conditions change. This oversight helps influence the investments within our actively managed ETFs.

I would say that the biggest misconception has to do with ETF liquidity. Many financial advisors are more familiar with how stocks trade than how ETFs trade, and therefore look at daily trading volumes as the measure of how liquid a particular ETF is. But daily trading volumes only show the tip of the ETF liquidity iceberg. Unlike stocks, the supply of ETF shares can be adjusted up or down to meet demand in the secondary market, thanks to the creation-redemption mechanism that we discussed. That creation-redemption generally takes place in-kind, means that ETFs are at least as liquid as their underlying securities.

After initially entering the ETF market with the Thrivent Small-Mid Cap Equity ETF, ticker TSME, Thrivent Asset Management is excited for the most recent expansion of our growing active ETF lineup with the launch of the Thrivent Ultra Short Bond ETF, ticker TUSB; and the Thrivent Core Plus Bond ETF, ticker TCPB. These launches bring our team and proprietary research-driven approach to active fixed income management into the ETF wrapper for the first time. We believe that ETFs can play an important role in client portfolios thanks to their many benefits, including greater tax efficiency, generally lower cost of ownership and intraday liquidity. It is with our clients in mind that we're continuing to bring the expertise of our investment professionals to the market in this powerful investment vehicle.