The exchange traded fund universe has quickly expanded as money managers craft numerous index-based strategies. While passive ETFs have flourished, the actively managed ETF segment has been conspicuously left depopulated.
However, things are changing as more traditional open-end fund managers step into the ETF business. For instance, David Advisors launched the Davis Select U.S. Equity ETF (NasdaqGM: DUSA), Davis Select Financial ETF (NasdaqGM: DFNL), and Davis Select Worldwide ETF (NasdaqGM: DWLD). DUSA will be managed by Christopher Davis and Danton Goei, a portfolio manager for the Davis Large Cap Value Portfolios and a member of the research team. Davis will also manage DFNL while Goei will manage DWLD.
“Our goal here; we feel what we are offering hasn’t been available in markets today,” Davis said in a conference call. “What we feel has not been available is a combination of real proven active management with the benefit of a traditional ETF.”
There are now 1,979 U.S.-listed exchange traded products with $2.639 trillion in assets under management, according to XTF data. However, there are only 173 actively managed ETFs with $31.1 billion in assets.
Davis’ entry into the ETF space could help bridge the gap and help investors gain active expertise in an efficient ETF wrapper.
“When we look at proven active management, there is long-term opportunity to generate results combined with judgement experience, high conviction, low turnover, accountability and alignment,” Davis said. “We don’t feel in the market there is anything available that combines strengthens of traditional ETFs with proven active management.”
Davis also explained that their fundamental active strategies are very well suited to be adapted into an ETF wrapper. Specifically, Davis explained that they are already a low cost operation with below average expense of current funds, produce low turnover that lends itself into an ETF format, focus on larger more liquid themes, include high conviction investments that are also agnostic and have a culture and history of transparency.