The universe of actively managed exchange traded funds that don’t disclose daily holdings continues luring in some of the biggest names in the fund industry.
This time around, it’s Charles Schwab. With its expertise and dominant perches in both the actively managed mutual funds and passively managed exchange traded funds arenas, Schwab makes for a logical entrant into the world of active ETFs.
See also: Active ETFs: Frequent Asked Questions (FAQs)
With more traditional mutual funds eyeing the ETF space but remaining reluctant to give up their secret sauce under the transparency of the standard ETF investment vehicle, many are looking into non-transparent exchange traded products as a way to combine the best of two worlds.
“Charles Schwab Investment Management is planning its first actively managed ETF, which also will be its first fund based on environmental, social and governance criteria,” reports ThinkAdvisor. “The Schwab Ariel ESG ETF Strategic ETF is being subadvised by Ariel Investments, which will provide expertise on ESG; the new fund also will not disclose its actual holdings on a daily basis, as traditional ETFs do.”
Schwab Also Breaking Into ESG
Schwab announced plans for the new ETF in a filing with the Securities and Exchange Commission (SEC). Assuming it comes to market, it will also be the issuer’s first dedicated environmental, social, and governance (ESG) fund.
As the universe of environmental, social, and governance (ESG) investing continues its rapid expansion, consumers are increasingly turning to ESG data and scoring. With new standards being added and advisors pondering how to best integrate ESG funds into client portfolios, there’s ample opportunity for active managers to make inroads into this growing market segment
“The Schwab Ariel ESG ETF Strategic ETF is the firm’s first foray into the ESG space. It currently has no ESG-focused ETFs or ESG-focused mutual funds, though the Schwab platform provides access to both types of funds offered by other asset managers,” according to ThinkAdvisor. “The Schwab Ariel ESG ETF will invest primarily in small- and mid-cap stocks that fall into the range of the Russell 2500 index and meet criteria set by Ariel Investments’ ESG strategy. It will trade on the NYSE, according to a filing with the SEC. The ETF will not disclose its actual holdings on a daily basis as traditional ETFs do, but instead will post a daily proxy portfolio.”
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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.
