BlackRock Inc., Dreyfus Inc. and Huntington Asset Advisors Inc. have filed with the Securities and Exchange Commission to launch actively managed exchange-traded funds, joining the growing number of firms looking to get into this area.
And in a first for the industry, Huntington plans to fold one of its mutual funds into an active ETF.
On June 17, Huntington Asset Advisors, the investment arm of Huntington Bancshares Inc., filed to launch two actively managed ETFs, its first foray into the area, said Randy Bateman, president and chief investment officer at Huntington.
The firm filed to launch the Huntington Ecological Strategy Fund, which will look to follow environmental themes, and the Huntington Rotating Strategy Fund, which seeks to shift holdings among various equity market segments where the firm sees opportunities, he said.
Huntington currently offers the latter investment strategy through its Huntington Rotating Markets Fund (HRIAX), which it plans to roll into the Huntington Rotating Strategy Fund once the ETF gains traction, Mr. Bateman said.
“We think the ETF market offers some advantages over mutual funds, and we want to participate in it,” he said.
The nine-year-old Rotating Markets Trust has $39.8 million in assets, excluding variable-annuity assets. Since inception, the fund has returned 15.44%, compared with 5.58% for the S&P 500.
Huntington would be the first firm to fold a conventional open-end mutual fund into an actively managed ETF, but observers speculate that it won’t be the last.
“I think this is going to be the first of many,” said Tom Lydon, a registered investment adviser and president of Global Trends Investments. As more fund managers look to get into the ETFs, they are realizing that the index-based arena is too crowded and they turn to active strategies, he said.
Because they can’t just launch ETF versions of their mutual funds without providing total transparency of their portfolio managers’ trades, folding the funds into the ETFs make sense.
“I think there will be more companies that do this because it’s going to be more economically favorable for advisers and their clients,” Mr. Lydon said.
Huntington also plans to file an ETF that uses derivatives. Given the SEC’s investigation into funds’ use of derivative products, however, the firm decided to file for the other two ETFs first.
“We didn’t want that one to hold these up,” Mr. Bateman said.
On June 9 Dreyfus filed to launch its first actively managed ETF, which will invest in both stocks and bonds in the United States or international markets, according to the filing. Dreyfus is a subadviser for one active ETF, WisdomTree Investments Inc.’s Currency Income ETF product, but this would be its first stand-alone active ETF.
“Dreyfus’ application with the SEC to create and operate actively managed ETFs is a reflection of the growing importance of ETFs in the marketplace and is a natural extension of the strong, diverse institutional investment capabilities at BNY Mellon Asset Management,” said spokeswoman Patrice Kozlowski. Dreyfus is a unit of BNY Mellon Asset Management.
In a June 17 filing,
BlackRock announced its intentions to launch two actively managed ETFs — one equity-based and the focused on fixed income.
BlackRock offers one active ETF, the iShares Diversified Alternatives Trust (ALT).
Christine Hudacko, a
BlackRock spokeswoman, declined to comment about the new active ETFs because the firm is in a quiet period pending SEC approval of the funds.
