Every new product launch requires a strong figurehead or a major company that investors can associate with. O’Leary, in our conversation, used the example of Bob Reynolds, CEO of Putnam Investments. About a year back, Putnam came out and launched a family of absolute return funds and Bob Reynolds went on, did a lot of advertising, came on and talked about it on CNBC and Bloomberg. Putnam has since taken in $2 billion of assets on those absolute return funds, even though they are load products. “That’s what Active ETFs need – they need somebody like a Bob Reynolds at Putnam who has a face, who has the ability to project into the public, who can go onto the shows and have articles written and have the public relations behind him”, added O’Leary.
There are some possibilities of figureheads emerging in the Active ETF space. PIMCO, of course, has really started making its presence felt in the space and given its strong reputation in the fixed-income world, it could be that provider that people can start associating Active ETFs with if they decide to promote these products strongly. Another candidate is Jeffery Gundlach, the well-respected bond manager that now runs DoubleLine Capital. DoubleLine partnered with Grail Advisors in July this year to plan for Active ETFs sub-advised by DoubleLine. Again, given the stature and reputation that Jeffery Gundlach brings with him, if his firm starts to make a strong push in Active ETF space, that could certainly attract some positive attention.
There are also the large mutual fund players, like Eaton Vance, Legg Mason, T. Rowe Price, who have shown interest in the space and could play a role in the future. But they will need to lay down a strong product line up, like PIMCO has, before they will have any effect on the market place. O’Leary echoed these sentiments saying, “You need to have a family of products, 10 or 12 or 20 products. Then you can come out and say this covers most of the major niche parts of a person’s portfolio and we as a major mutual fund company have put our capital up and our brand up and we think this is a great idea. That’s the sort of promotion that’s not occurring right now”.
Education Alone Not Sufficient, Promotion Key
Education is indispensible. Educating investors about the intricacies of a new product is no doubt helpful in ensuring that investors know what they are getting into and making them aware of important differences. However, education by itself is not enough to generate the kind of attention necessary for a new space like this to take off. That’s where promotion and marketing are just as crucial, especially if Active ETFs hope to taste the kind of success that other new ETF segments have enjoyed.
Disclosure: No positions in above-mentioned names.
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