iShares Files More Actively Managed ETFs

April 8th at 7:18am by Tom Lydon

BlackRock’s iShares has filed with the Securities and Exchange Commission to launch two active U.S. equity ETFs, but the money manager has yet to act on any of registered active products.

According to a SEC filing, the iShares Enhanced U.S. Large-Cap ETF (NYSEArca: IELG) will try to generate long-term capital appreciation through holding U.S. large-cap securities based on quantitative investment characteristics, such as earnings variability, leverage, price-to-book ratio and market capitalization. IELG has a 0.18% expense ratio.

Sector allocations include consumer discretionary, financial, heatlhcare and utilities, but it may change over time.

According to a separate SEC filing, the iShares Enhanced U.S. Small-Cap ETF (NYSEArca: IESM) will try to generate long-term capital appreciation through tracking U.S. small-cap stocks based on quantitative investment characteristics, such as earnings variability, leverage, price-to-book ratio and market capitalization.

Sector allocations include consumer discretionary, consumer staples, financial and utilities.

While iShares has filed a number of active ETFs over recent years, including quasi-active equities, currencies, short-duration bonds and corporate bonds, the fund sponsor has not listed any of its registered products, writes Jackie Noblett for Ignites. [Active vs. Passive Debate Spills Into ETFs]

The ETF provider is not alone in this regard. Mutual fund managers Legg Mason and Federated have both received exemptive relief to launch active ETFs, but they are quietly sitting on the sidelines.

For now, some believe product registrations are a way to test how regulators would react to a products investment strategy or structure.

“There’s a lot of probing out there with the SEC, what are they willing to do, where are they willing to go,” Larry Petrone, director of research at kasina, said in the article.

Industry experts, though, believe this is the year that more managers will be breaking into the active ETF space. [Institutional Investors May Step Up to Active ETFs]

Cerulli Associates found that 57% of ETF sponsors plan to develop active fixed-income ETFs and some 37% of sponsors want to develop active equity ETFs.

“Firms saw what Pimco did in the fixed-income space and are looking to move on it,” Alec Papazian, associate director at Cerulli, said in the article.

For more information on new product launches, visit our new ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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