The nascent actively managed exchange traded fund (ETF) category is not as firmly established as the larger industry, but it’s quickly growing. Grail Advisors, an actively managed ETF provider launched their first ETF in May 2008, and the firm isn’t resting on its laurels.
Actively managed ETF provider Grail Advisors recently added two more funds to their lineup: Grail McDonnell Intermediate Municipal Bond ETF (NYSEArca: GMMB) and the Grail McDonnell Core Taxable Bond ETF (NYSEArca: GMTB). [Why Actively Managed Bonds Are in Favor.]
The Grail McDonnell bond ETFs allow portfolio managers unrestricted trading. The funds offer low-cost exposure to the bond market, transparency of holdings and intraday liquidity. McDonnell Investment Management is sub-advising both funds. Both ETFs will limit maximum expense ratios to 0.35%.
Grail CEO William Thomas says the provider chose to launch fixed-income funds because “This is a fixed-income market, and investors are looking for fixed-income ETFs.” The volume they’ve seen in the funds in their early days of trading underscores this, Thomas says. [Are ETF Criticisms Founded?]
Thomas feels strongly that actively managed ETFs are the next step in the evolution of ETFs, and other big-name firms are joining the actively managed ETF space, which only validates what Grail is doing. Thomas observes that the lower fees, transparency, tax efficiency and liquidity in ETFs is forcing other firms to adopt such measures to stay competitive in a fast-growing industry.
Growth in assets is not shooting up as fast as some people thought, but Thomas says he couldn’t feel any more strongly than he does that actively managed ETFs will continue to grow and that they’ll have a place in the larger ETF industry. [Opportunities for Actively Managed ETFs.]
“My belief is that actively managed ETFs work for both equity and fixed-income, that the inherent benefits that ETFs offer shareholders are critical,” he says. “There have not been large inflows into equity ETFs, but you’re not seeing flows to equity mutual funds, either.”
Thomas also expects future actively managed ETFs will include equity, fixed-income, sector funds, country-specific funds and additional fixed-income capabilities. As for where Grail hopes to be in the future, “Onward and upward. We want to expand on our reputation as the leader in delivering active strategies in the ETF marketplace.”
To reach that goal, Thomas says, Grail eventually wants to offer an “all-weather” product line that is done with the best sub-advisors for any particular strategy. [Tom Lydon Talks About Active ETFs.]
For more information on actively managed ETFs, visit our actively managed category.
Max Chen contributed to this article.