Principal Financial Group’s (NYSE: PFG) Principal Global Investors signaled its intent to join the rapidly-growing exchange traded funds industry with the recent hiring of Paul Kim as managing director and head of ETF strategy.
“In this newly created role, Kim is responsible for the launch and growth of The Principal’s active ETF business. Kim will help shape and execute The Principal’s global ETF strategy, playing a key role in ETF product development, the building of operational and capital markets support, and the distribution and marketing of The Principal ETFs. Kim will also help develop relationships with ETF market makers, intermediaries, investors and service providers,” according to a statement issued by Iowa-based Principal Financial.
Previously, Kim was a senior vice president and ETF product manager at PIMCO, one of the largest managers of actively managed ETFs.
At the end of 2014, Principal had $80.1 billion in client assets. The firm’s clients include public and private pension funds, central banks, sovereign wealth funds, life insurance companies, multi-manager platforms, foundations and endowments.
Although the statement did not confirm as much, it appears likely that Principal would pursue actively managed funds as its entry into the ETF business. In a recent commentary on small-caps, Principal Global notes active small-cap managers “have the ability to add value” and that when investors buy index funds and ETFs, “they’re blindly buying in bulk.”
Principal joins a growing number of large financial firms with roots in active management that are mulling entries into the ETF space.
Last month, the Securities and Exchange Commission could approved an application by American Funds, one of the largest issuers of mutual funds, to enter the ETF business.
California-based American Funds has $1.2 trillion in assets under management, or more than half the current AUM tally for the U.S. ETF industry. However, ETFs are the fastest-growing corner of the asset management industry, underscoring the desire of mutual fund companies to become involved with products that institutional investors and advisors are increasingly adopting. [Institutions Boost ETF Usage]
While it took nearly two decades for the ETF industry to reach $2 trillion in assets, it will not need nearly as long to get to $5 trillion, according to a new report by PwC. The PwC repots says the global ETF industry will reach $5 trillion in combined AUM by 2020. [ETFs not Stopping at $2 Trillion]
Last week, it was reported that SEC filings detail a possible return to the ETF industry by Nuveen Investments. Last week’s SEC filing isn’t the first sign Nuveen has been considering returning to ETFs. In December, the company said its Nuveen Commodities Asset Management unit plans to convert two of its commodities mutual funds into ETFs. [Nuveen Eyes ETF Return]
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.