Combining a Proven Active Style with Benefits of the ETF Wrapper

With many areas of the beta index exchange traded fund space filled out, a number of money managers are beginning to fill out the actively managed segment of the ETF universe.

ETF Trends publisher Tom Lydon spoke with Chris Davis, Chairman of Davis Advisors, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about Davis Advisors’ recent entry into the ETF space.

“We felt in the world of ETFs, traditional ETFs, there was something missing,” Davis said. “Those ETFs have these advantages of transparency and low cost and tax efficiency, but we also feel that there are huge advantages to proven long-term active management.”

According to XTF data, there are only 180 actively managed U.S.-listed ETFs with $32.6 billion in assets under management, compared to the overall universe of 1,997 U.S.-listed ETFs with $2.754 trillion in assets under management.

“We’re in a good position as a firm to put the benefits of proven long-term management together with the benefits of a traditional ETF,” Davis said.

The active managers space, though, has fallen on tough times in recent years as more investors shift out of actively managed fund strategies in favor of low-cost, passive index-based investments. Davis, though, argued that this is not surprising given what the average active open-end mutual fund has delivered

“They have high cost. They have high turnover. They have portfolio managers that have very little experience. They don’t have a lot of alignment. They often don’t have money invested in their own funds,” Davis said. “So it’s hard to make a case for why that should outperform.”

However, Davis Advisors are among the few that have provided a history of outperformance.

“We have a record of our proven long-term asset managers, active managers really looking different from the benchmarks,” Davis said. “Also doing our own research – identifying and building concentrated portfolios that have been able to outperform.”

Now, ETF investors can also gain exposure to Davis’ proven research and investment styles through the Davis Select U.S. Equity ETF (NasdaqGM: DUSA), Davis Select Financial ETF (NasdaqGM: DFNL), and Davis Select Worldwide ETF (NasdaqGM: DWLD). DUSA is 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 also manages DFNL while Goei manages DWLD.

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