As more investors shift assets into exchange traded funds, active managers are crafting their own ETF strategies to get a slice of the growing demand.
Active money managers are launching their own ETFs as demand from institutional investors, retail investors and financial advisors grow. For instance, T. Rowe Price Group, Legg Mason, Principal Globlal Investors and Goldman Sachs Asset Management have all filed with the Securities and Exchange Commission to launch ETFs, reports James Comtois for Pension & Investments.
Additionally, other firms, like New York Life Investment Management and Janus Capital Group, have acquired smaller ETF shops to get a footing in the industry.
With demand for ETF strategies on the rise, more money managers are thinking about launching their own ETF strategies as an easier way to grow assets under management. For those who are thinking about launching their own ETFs, the second annual ETF Boot Camp in New York next month may provide insights into entering the ETF business. [Financial Advisor ETF Usage on the Rise]
“ETF usage overall is definitely being driven in large part by institutions,” Justin R. White, a partner with money manager consultant Casey, Quirk & Associates LLC, told Pensions & Investments. “Many are using them to gain exposure in places they haven’t been exposed to before.”
Macrae Sykes, an analyst at Gabelli & Co. Inc., pointed out that increased interest for liquidity, smart beta and customized strategies are among the top reasons that have attracted institutional interest.
“I think for ETFs, there’s an attractive component in the instant liquidity, as opposed to indexed mutual funds,” Sykes told Pensions & Investments. “And to the extent that there’s a move (among asset owners) to tactical asset allocations, ETFs can be easily incorporated into that.”
Paul Kim, managing director and head of ETFs for Principal Global Investors, which recently launched the Principal EDGE Active Income ETF (NYSEArca: YLD), argues that money managers see ETFs as an offensive and defensive offering. Specifically, ETFs are seen as a useful growth tool that allows a business to expand and attract investors, and some managers may also be entering the ETF business for fear of being left behind as the industry takes off.
Money managers are “seeing a lot of outflows from active equity mutual funds and inflows into passive equity ETFs,” Kim said. “That worries a lot of managers; if they don’t have an ETF presence that can be seen as a threat. As a global manager, we need to have an ETF strategy.”
For more information on the ETF industry, visit our current affairs category.
Money managers who are looking into constructing their own ETFs may also interested in attending the second annual ETF Boot Camp in New York next month. Whether you’re an ETF start-up, fund company, broker dealer, pension plan, endowment, private equity firm, fund board independent director, 401k plan provider or ETF industry executive…this conference is designed for you. This one-of-a-kind event will condense everything you need to know about the inner workings of the ETF business into two days.
Max Chen contributed to this article.