A new paper examines the use of ETFs by actively managed funds and finds mixed results based on the degree of use. The paper notes that 24 percent of actively managed funds held ETFs in 2014, up from almost 8 percent in 2004. The researchers divided those funds that do use ETFs into three tiers based on their degree of use and find that actively managed funds that are in the top third underperform funds that do not use ETFs by 1.94 percent per year. Despite the authors’ assertion that ETF use may ease a funds move into and out of markets, the paper also finds that the top-third funds are “significantly worse” at timing the markets than those funds that do not use ETFs. However, funds that are in the bottom third are “significantly better” at timing markets than funds that do not use ETFs. The authors find that funds that utilize ETFs exhibit no greater ability to manage fund flows as compared to those that do not, though funds in the top third of ETF tend to hold more cash than other funds.