BlackRock’s iShares engineered actively managed exchange traded funds in direct competition with the mutual fund industry, targeting registered investment advisors who are looking for alternative core holdings.
Sue Thompson, head of the RIA and asset manager group for iShares at BlackRock, stated that the new actively managed iShares Enhanced U.S. Large-Cap ETF (NYSEArca: IELG) and iShares Enhanced U.S. Small-Cap ETF (NYSEArca: IESM) were crafted for advisors who expressed frustration with a competing mutual fund, reports Jackie Noblett for Ignites.
“They want to diversify away from this particular product,” Thompson said in the article.
Instead, the new “enhanced” offerings come in the low-cost, easy-to-use ETF wrapper and provide the flexibility to adjust portfolio holdings based on current market conditions. [A Closer Look at the Active ETF Business]
According to Cerulli Associates, around 55% of RIAs use ETFs, but on average, advisors only allocate 13% of portfolios to ETFs. Among all advisor types, mutual funds outweigh ETFs in client portfolios by 37% to 7%, respectively.
However, if sponsors find a way to gain market share in “core” portfolio holdings, ETFs could become a threat to the mutual fund industry, Alec Papazian, associate director at Cerulli said.
Robert Goldsborough, ETF analyst at Morningstar, also believes that more investors could begin to explore actively managed ETFs as core portfolio holdings as they become familiar with the investment vehicle. [Growing Interest for Actively Managed ETFs: SEI Report]
For more information active funds, visit our actively managed ETFs category.
Max Chen contributed to this article.