Many large mutual fund providers have received exemptive relief from the Securities and Exchange Commission to launch exchange traded funds, but the firms haven’t taken the next step to market.
For example, Fidelity, T. Rowe Price, Franklin Templeton, John Hancock, Legg Mason and Federated are among more than 20 fund managers that have the necessary SEC approval, but they have not launched an ETF yet, reports Jackie Noblett for Ignites. [Calamos Wants in on Active ETF Space]
“You can file for exemptive relief without any commitments,” Alec Papazian, associate director at Cerulli Associates, said in the article. “Maybe they’re thinking that they’ll do that and come up with a more overarching strategy later.”
Mutual fund providers may just want the exemptive relief in case they want step into the ETF industry, or they might push off the idea for a rainy day. [Franklin Templeton Readying First Foray into ETFs]
“Maybe they then decided that they don’t want to do anything with [the exemptive relief], or they put it on the back burner,” Papazian added.
Other ETF industry observers argue that mutual funds could be holding back due to regulatory challenges with bringing products to market, the amount of time necessary to go through the regulatory process and selective investors in the active ETF space.
Noah Hamman, CEO of AdvisorShares, describes the so-called 19b-4 approval process to list an active ETF on an exchange as “an absolute nightmare.”
There are only 61 actively managed ETFs with $14.6 billion in assets under management, compared to a total of 1,503 U.S.-listed ETFs with $1.6 trillion in assets, according to XTF. Only 12 of 90 new ETFs launched this year were actively managed, including products from BlackRock’s iShares, Cambria, AdvisorShares, WisdomTree, First Trust and State Street Global Advisors.
For more information on mutual funds and ETFs, visit our mutual funds category.
Max Chen contributed to this article.