The ETF industry has grown by leaps and bounds in recent years, thanks in large part to a shift by investors towards cost-efficient passive indexing strategies and away from pricey active management. But many in the industry have opined that actively-managed ETFs -- in a sense hybrid products that exhibit characteristics of both active mutual funds and passive ETFs -- would be the next big area of growth. PowerShares debuted the first actively-managed ETFs in April 2008, and Grail followed the next year with what some consider to be the first true actively-managed exchange-traded funds (the PowerShares products rely on quantitative analysis to make buy/sell decisions, and at one point were restricted in terms of the frequency with which they could trade) [see also Are We Out of ETF Ideas? Not By a Long Shot]. 

The launch of Grail's first ETF in particular was hailed as a game-changer in the investment world, and predictions of the downfall of the mutual fund industry were hurled about. In the almost 18 months since then, a number of actively-managed products have hit the market from a handful of different issuers. Moreover, dozens of firms have sought SEC approval to introduce actively-managed mutual funds -- many of them heavyweights of the mutual fund industry. But despite the launch of several new products and the crowd gathering around the perimeter of the active ETF space, many have been disappointed with the development of active ETFs and are beginning to wonder if the structure will ever catch on with investors [see also Bond ETFs: 12 Stops Along The Risk/Return Spectrum].

Despite the slow start, there are a number of reasons to remain optimistic over the future of the active ETF industry. Many of the products on the market are still relatively young, meaning that they haven't yet accumulated a sufficient track record over which managers and methodologies can be evaluated. It wouldn't be surprising if a number of active ETFs received big cash inflows as a third birthday present. Moreover, many of the biggest names in active management haven't yet waded into the ETF waters -- though several are laying the groundwork to make a run [see Handicapping The Active ETF Race]. The big fund managers that have launched ETFs -- primarily PIMCO -- have been incredibly successful, giving reason to believe that the potential entrance of the Legg Masons and T. Rowe Prices of the world could open the floodgates.

Much of the attention has focused on disappointments among active ETFs as well as the potential that still remains. But a number of active ETFs have quietly enjoyed great success, further strengthening the argument that this corner of the market has a bright future ahead. Below, we profile several active ETFs that have been extremely successful -- some in terms of performance and some in terms of generating investors interest [for more ETF insights, sign up for our free ETF newsletter]:

WisdomTree Emerging Markets Local Debt Fund (ELD)
One of the many innovations in the fixed income space this year has been exposure to emerging markets debt denominated in local currencies. Funds from iShares (EMB) and PowerShares (PCY) have been around for years, but until recently, the only ETFs investing in debt of emerging markets issuers focused on dollar-denominated securities. ELD, which isn't linked to a benchmark, debuted in August of this year, and has seen a flood of interest from investors. In an environment where issuers generally beg and borrow to scrape together a few million to launch a new product, ELD debuted with $125 million, and has more than tripled in size in the three months since its launch.

With interest rates at historic lows in the U.S. and much of the rest of the developed world, emerging market debt has become an intriguing option for investors hunting for more attractive fixed income yields. ELD spreads exposure across more than a dozen different countries, with Indonesia, Brazil, Mexico, and Malaysia all receiving allocations of about 11% [read more about ELD's strategy].

AdvisorShares/Cambria Global Tactical Allocation ETF (GTAA)
This fund is one of the most recent additions to the ETF lineup, and it has already proven popular among investors. GTAA is the product of a partnership between AdvisorShares and Cambria, the firm run by Meb Faber and Eric Richardson. Besides authoring The Ivy Portfolio, the Cambria crew has conducted extensive research in order to develop a quantitative asset allocation model that is designed to deliver equity-like returns with bond-like volatility and drawdown.

GTAA invests in ETFs representing a variety of global asset classes, including domestic and international equities and fixed income, real estate, commodities, and currencies. Asset allocation decisions are determined by algorithms designed to develop a well-diversified, risk-controlled portfolio, meaning that GTAA doesn't seek to replicate the performance of any specified benchmark. Since debuting in late October, GTAA has already attracted more than $20 million in assets. The early returns to investors have been impressive as well; GTAA is up about 3% since launch.

WisdomTree Dreyfus Chinese Yuan Fund (NYSE: CYB)
If a survey were conducted asking investors to identify the largest actively-managed U.S.-listed ETF, WisdomTree's Chinese yuan fund probably wouldn't be the top choice. But like all of WisdomTree's currency products, CYB is indeed actively-managed. That affords the fund managers flexibility in determining which types of securities will best accomplish the stated objective: delivering returns that are reflective of both money market rates in China available to foreign investors and changes in value of the Chinese Yuan relative to the U.S. dollar. CYB invests in Treasuries, Repurchase Agreements, Corporate Bonds, and Money Markets, as well as currency forward contracts [see also Three ETFs To Watch During The Great Currency War Of 2010].

CYB's assets have surged in 2010 as investors have scrambled to establish exposure to a currency that some believe may be poised to appreciate significantly against the dollar in coming months. Others may have embraced CYB as a safe-haven ETF that effectively serves as a money market fund with exposure to the dollar/renminbi exchange rate. So far in 2010, CYB is up about 1.6%.

PIMCO Enhanced Short Maturity Strategy Fund (NYSE: MINT)
PIMCO was late to the ETF game; the California-based firm didn't launch its first ETF until the middle of 2009. But thanks to a sterling reputation and an impressive track record (not to mention a household name), the bond giant has made quite a splash. The majority of PIMCO's ETFs are passive products that seek to replicate the performance of various fixed income products. But the company also offers four actively-managed bond ETFs, including one that may be best described as a "money market-plus ETF." MINT is an actively-managed fund that focuses on short-duration investment grade securities, including corporate bonds, agency debentures, and mortgage securities.

PowerShares Active U.S. Real Estate Fund (PSR)
A few months after PowerShares rolled out the first four actively-managed ETFs, the company debuted a fifth offering exposure to domestic REITs. PSR is benchmarked against the broad-based FTSE NAREIT Equity REITs Index, seeking to identify index components that are poised to outperform their peers. The track record for PSR is still relatively short, but so far, the results have been stellar. Between its launch in November 2008 and the end of the third quarter, PSR had returned about 55%. During that same period, the benchmark FTSE NAREIT Equity REITs Index gained about 37% -- meaning that this fund has delivered a performance gap wide enough to drive a truck through [see also Three Active ETF Gamechangers].

PSR's solid performance hasn't really translated into significant interest, as investors seem content to achieve real-estate exposure through passively-indexed funds. PSR has about $20 million in assets, and charges an expense ratio of 80 basis points, well above the 0.44% average for the Real Estate ETFdb Category.

iShares Diversified Alternatives Trust (NYSE: ALT)
Most investors don't think of iShares as an issuer of active ETFs, but among the company's diverse lineup is ALT -- a product not linked to a specific benchmark. ALT's objective is to maximize absolute returns from investments with historically low correlation to traditional asset classes, while also delivering relatively low volatility. To accomplish this, ALT maintains both long and short positions in futures contracts written in assets that historically have exhibited strong correlations. Recently, ALT maintained significant long positions in 10-year Treasury futures and the Aussie dollar, while going short Australian T-Bond futures and the Canadian dollar.

The result of these various long and short positions in futures and forwards is a fund with a beta near zero. Since its inception in late 2009, ALT has been essentially flat, trading almost exclusively within a 5% window. Despite a relatively high expense ratio -- ALT charges 0.95% -- this product may have value in an environment where identifying non-correlated assets can be a tricky task.

Grail American Beacon Large Cap Value ETF (GVT)
The first active ETF product from Grail, GVT debuted in mid-2009 amidst predictions that the launch signaled the opening of the active ETF floodgates. GVT has struggled to accumulate assets -- currently standing at about $2 million -- but has put together an impressive track record (albeit a short one). This fund is benchmarked against the Russell 1000 Value Index, which measures the performance of large-cap U.S. stocks exhibiting low pricing multiples and high dividend yields.

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