Tag Archives: actively-managed ETF

ETF News

Nuveen, Now Under TIAA-CREF Umbrella Takes On ETF Issuers..Again

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Nuveen, known as one of the exchange-traded-fund industry’s first pioneers is back, and now they’re loaded for bear with a fresh angle courtesy of parent company TIAA-CREF.

Courtesy of InvestmentNew.com, here’s the long and the short of the Nuveen’s reincarnation:

investmentnews.com logo Nuveen Investments Inc. is rebooting a campaign that may culminate in the firm offering its own ETFs for the first time, 15 years after it pioneered, then dropped, efforts to bring the first bond exchange-traded funds to market.

Nuveen’s about-face, disclosed last Friday in filings with securities regulators, comes as a stampede of adviser-facing asset management firms without ETFs rush to capitalize on the fast growth in that market, which now manages $2 trillion in the U.S.

But unlike some of its peers that are joining the stampede for the first time, Nuveen was an early pioneer of the structure. It first asked for permission to offer index-based ETFs in 2000, at the time developing proposals for what could have been the very first bond ETFs. Both areas now enjoy tremendous popularity, a boon to BlackRock Inc., the Vanguard Group Inc. and State Street Corp., among other firms.

But Nuveen shuttered its ETF unit in 2002, facing pressure to focus on businesses that could make more money, according to ETFs for the Long Run, a 2008 book on the industry’s history by Lawrence Carrel.

Greg Bottjer, a Nuveen executive who leads product development for the firm’s retail mutual funds, said the firm is exploring the possibility of adding to its product set, which includes mutual funds and some ETFs run in collaboration with State Street.

“The active ETF market is much further advanced,” Mr. Bottjer said. “There’s a lot more familiarity, comfort and exposure to active ETFs, and there are some large active asset management firms out there doing this. The momentum is really there today compared to where it was over 10 years ago.”

TIAA-CREFcompleted its acquisition of Chicago-based Nuveen in October, merging two companies with distinct cultures but a common goal to increase their sales among advisers. ETFs may be key to doing that as the investments have been a popular option deployed in accounts on which investors pay a fee to their adviser, in part because of their perceived cost advantages.

If the regulatory process matches that of previous applicants, it could take several months or longer for Nuveen to get an approval, and Nuveen is under no obligation to produce the funds once it gets the go-ahead. But an approval would give the firm an advantage over competitors who haven’t gone through the process.

There were 14 applications for new brands in the space last year, according to a database

No ETF issuer has been given permission yet to build actively managed ETFs that do not disclose underlying holdings regularly, but Eaton Vance Corp. recently won approval for a mutual fund-ETF hybrid called NextShares that would enjoy that ability.

To read the full article from InvestmentNews, please click here

ETF News

Blackrock ETF Blocked By SEC; Non-Transparency is Not Good Says Regulator..Duh…

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MarketsMuse post courtesy of extract from report by Barron’s Johanna Bennet..our Editorial team leads in with “How could anyone think that an ETF (actively-managed or passive) that doesn’t disclose the underlying components to its investors could pass muster with regulators, no less investors?

The SEC has denied requests that would have allowed non-transparent active ETFs to hit the U.S. market.

In decisions issued earlier today, the regulatory agency denied applications by Precidian Investments and Blackrock’s (BLK) Spruce ETF Trust unit seeking to launch a novel type of actively managed exchange-traded fund that would not be required to disclose its portfolio holdings on a daily basis.

Investors can read the SEC rulings for Precidian here and review the Blackrock decison here.

Active ETFs are available in the U.S. But SEC rules require the funds disclose their holdings daily, which has discouraged firms from offering active products. The proposed non-transparent ETFs would disclose holdings quarterly, as mutual funds do, and often with a 60-day lag.

Precidian and Blackrock are among several firms proposing non-transparent active ETFs, including Eaton Vance (EV), State Street (STT) and T. Rowe Price (TROW). According to ETF.com, proponents of the rule change argue that it allows fund managers to protect their investing ideas and tactics and prevents front running.

Eaton Vance and State Street did not immediately respond to requests for comment. T. Rowe said it would still pursue its own proposal.

But at the heart of the SEC’s ruling regarding Precidian is a concern that the mechanism proposed to keep the market price of such funds in line with their net asset values is insufficient. As the SEC ruling reads: Continue reading →

ETF News, Strike Price

ETF New Rules: SEC Says Derivatives for Actively-Managed ETFs…

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etfdb images Courtesy of Back in March of 2010, the SEC began a review of the use of derivatives by ETFs, specifically actively-managed and leveraged funds. Norm Champ, Director of the SEC’s Division of Investment Management, stated that “The use and complexity of derivatives have grown significantly over the past two decades and have given rise to many interpretive and policy issues under the 1940 Act.”

But after over two years of analysis and review, the SEC finally made its decision last week: fund companies are now able to seek regulatory permission to include derivatives in actively-managed ETFs. There are, however, explicit stipulations that fund managers must adhere to [see also Actively-Managed ETFdb Portfolio ETFdb Pro Members Only]:

  1. The ETF’s board must periodically review and approve the ETF’s use of derivatives and how the ETF’s investment advisor assesses and manages risk with respect to the ETF’s use of derivatives.
  2. The ETF’s disclosure of its use of derivatives in its offering documents and periodic reports is consistent with relevant Commission and staff guidance.

The SEC stressed that it will continuously review this issue, but in regards to decisions concerning the use of derivatives by leveraged exchange-traded funds, they are still hesitant to grant permission. Champ expressed his concern over these powerful products, stating that “Because of concerns regarding leveraged ETFs, however, we continue not to support exemptive relief for such ETFs.”

What Does This Mean For ETF Investors?

Derivative use has been a touchy subject for many investors, as these powerful instruments have led to some of the worst financial disasters of all time. On the other hand, they have also provided lucrative opportunities for those with the knowledge and in-depth understanding of how exactly these products work. But will using derivatives in actively-managed ETFs do more good or harm for investors? Unfortunately, the most reasonable answer is that only time will tell. Below we outline the top five actively-managed funds that investors may want to keep a close eye on [filter by active/passive and other fields with the free ETF Screener]:

Ticker ETF Expense Ratio AUM
BOND Total Return Exchange-Traded Fund 0.55% $3.9 billion
MINT Enhanced Short Maturity Strategy Fund 0.35% $2.1 billion
ELD Emerging Markets Local Debt Fund 0.55% $1.5 billion
ALD Asia Local Debt Fund 0.55% $462 million
CEW Dreyfus Emerging Currency Fund 0.55% $276 million
 *As of 12/13/2012

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb P

Global Macro Strategy

A New ETF Managed By ‘Random Roger’

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ImageCourtesy of Brendan Conway

Once upon a time, exchange-traded funds were simple index trackers. Nowadays you see the launch of products like the AdvisorShares Global Alpha & Beta ETF (RRGR).

This actively managed exchange-traded fund, which launched on NYSE Arca today, is built to reflect manager Roger Nusbaum’s ”tactical” and “global asset-allocation strategy (and his stock picks), with the aim of beating major indexes such as the S&P 500 and the Barclays Capital Aggregate Bond Index. It also has the unusual feature of buying and selling other ETFs. The “Random Roger” thing will be familiar if you’ve visited Nusbaum’s popular blog.

RRGR, which launched today on NYSE Arca, has a weighting of nearly 15% in the iShares Dow Jones U.S. Technology Sector Index Fund (IYW), 12% in cash, and 4% in the Vanguard Telecom Service ETF (VOX). HJ Heinz (HNZ), Kinder Morgan Emerging Partners (KMP) and Diageo PLC (DEO) are three of 11 stocks and ETFs that carry a 3% weighting, according to AdvisorShares. The yield will be around 3%, also according to AdvisorShares.

There have been predictions that actively managed ETFs are the next big thing. So far, though, the deepest inroads have been made in actively managed bond funds. Bill Gross’ Pimco Total Return ETF (BOND), just a few months old, is already the biggest actively managed ETF by assets. But the biggest equity ETF by assets isn’t a conventional equity ETF at all — it’s the $325 million AdvisorShares Active Bear ETF (HDGE), a short-selling strategy.

The new ETF has a net expense ratio of 1.40%, according to AdvisorShares’ website. Nor is it the first ETF to buy and sell other ETFs — AdvisorShares already has some of those.

ETF News

ETFs Passive No More in Challenge to $7.8 Trillion Market

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By Christopher Condon on June 26, 2012

Exchange-traded funds are posing a new threat to the $7.8 trillion market for active mutual funds by challenging the notion ETFs are only good for tracking benchmarks.

The $552 million First Trust Health Care AlphaDex Fund (FXH) (FXH), offered by Wheaton, Illinois-based First Trust Portfolios LP, follows an index that selects and weights U.S. health-care stocks based on a proprietary mix of financial measures such as sales growth and return on assets. Since its creation in 2007, the ETF has beaten the S&P 500 Health Care Index — 52 stocks chosen to broadly represent the industry — by almost 6 percentage points a year, and the actively managed Fidelity Select Health Care Portfolio by 3 percentage points annually.

“This isn’t an ETF that’s trying to track a benchmark,” Todd Rosenbluth, an analyst at research firm S&P Capital IQ in New York, said in an interview. “Its aim is to beat it.”

The AlphaDex fund is one of 155 ETFs, collectively holding about $12 billion, that are blurring the line between active and passive investing and threatening to further erode the market share of traditional stock and bond mutual funds. Unlike their passive peers, which use broad indexes to match a benchmark’s return, their goal is to capture outperformance, or alpha. While their assets are still a tiny slice of the fund industry, the payoff for such ETFs is potentially enormous: The pool of money chasing market-beating returns is almost four times larger than the $2.1 trillion held by investors in passive products.

Pimco ETF

Asset managers for years have pondered how to effectively combine the security-selection element of actively managed mutual funds with the tradability, tax advantages and other efficiencies of ETFs. Most have been dissuaded by the product’s necessity to reveal its holdings daily, which allows dealers to create new shares by delivering large baskets of a fund’s underlying securities to the ETF.

Active managers, especially those focused on equities, say that transparency would make it too easy for others to front-run their movements or simply copy them without paying to be in their fund. Some firms, including BlackRock Inc., the world’s biggest ETF provider, have asked permission from the U.S. Securities and Exchange Commission to introduce active ETFs that don’t reveal holdings daily. The agency hasn’t approved any such plans. Continue reading →

ETF News, Strike Price

Black Swan ETFs Debut

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by on May 31, 2012

Innovation in the ETF industry has become standard over the past several years, with countless first-to-market products opening up new asset classes and strategies. And it turns out that the U.S. isn’t the only place where product development is going full throttle; our neighbors to the north have recently rolled out some rather unique exchange-traded products.  Horizons, one of the largest Canadian issuers of ETFs, recently debuted a suite of Black Swan ETFs that are designed to protect investors against sudden plunges in equity markets.

The new ETFs, including the Horizons Universa Canadian Black Swan ETF (HUT) and Horizons Universa U.S. Black Swan ETF (HUS) will combine traditional exposure to stock indexes with an actively-managed options strategy. The goal of these products is to protect assets in the event of extreme downside events–such as a wave of sovereign debt defaults in Europe.

The new Black Swan ETFs essentially consist of two components: exposure to broad stock indexes such as the S&P 500 or S&P/TSX 60 and a pool of put and call options that utilizes the Black Swan Protection Protocol. The basket of options will be actively managed by Universa Investments, which was founded by Mark Spitznagel. Universa made a fortune by betting against stock markets in 2008; Spitznagel’s fund returned more than 100% in 2008 as global stock markets tumbled.

Nassim Taleb serves as a Distinguished Scientific Advisor for Universa.

The idea behind the options pool is to assemble protection in the event that stocks plunge, with the goal of offsetting the losses incurred by the traditional long only position. That can potentially be done by simply buying put options that will be valuable if stock markets decline, or selling call options that will expire worthless in the event of a sharp decline. The goal is to generate positive returns from the options pool when stocks decline, with gains invested into equity markets when they are cheap on a historical basis–consistent with a “buy low” strategy.

The strategy essentially is intended to dramatically reduce downside risk taken on by investors. In exchange, the Black Swan ETFs may give up some upside potential when stocks are rallying. For example, the premiums paid to buy put options on the S&P 500 could erode returns if they expire worthless. Continue reading →

ETF News

Actively managed ETFs get big-name backing

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Article courtesy of Rachel Koning Beals..

Actively managed exchange-traded funds may have gotten the headliner needed to push this sleepy category into the investing mainstream.

Bill Gross and his bond-fund-giant Pimco in early May added a third actively managed ETF to their roster. This offering follows their actively managed Pimco Total Return ETF BOND +0.04% .

The ETF, a twist on Gross’s flagship Pimco Total Return Fund PTTAX +0.09% , is drawing a robust following in its short two-month run. It had more than $800 million in assets under management as of mid-May.

The actively managed ETF sub-category has remained a paper-thin slice of the trillion-dollar market. Now, in addition to Pimco, ETF leaders like State Street Global Advisor’s SPDRs, BlackRock’s iShares, Wisdom Tree, and others, look to increase their presence (slowly, for now) in the actively managed side of the business.

“Pimco’s lending its name into the active ETF space is a game-changer for the entire industry. It’s one of those things where if you don’t get ahead of the times, then you are left in the dust trying to catch up,” said Tom Lydon, president of Global Trends Investments and editor of ETFtrends.com. Continue reading →

ETF News

Actively Managed ETFs Are Less Volatile, Lipper Finds

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Courtesy of  Barron’s Brendan Conway:

By Brendan Conway

Actively managed exchange-traded funds attempt to pick winners much like, say, Bill Miller does in mutual funds. The number of such funds has taken off, and while they’ve tended to underperform versus passive index-tracking ETFs, they’ve also been less volatile.

Those are some of the findings of a new Lipper report by Sasha Franger, the company’s fiduciary research analyst. The group has returned an annualized 2.78% over the last four years, versus 3.20% for “pure” index peers, Franger found. The trend turned in the last year, however: Actively managed ETFs’ performance pulled ahead slightly.

Market gyrations appear to be blunted in actively managed ETFs. This makes intuitive sense: An active manager should be able to pull your assets out of plunging equities or bonds when the environment calls for it. Passive funds can’t.

Median active ETF annual performance ranged from 1.31% to 10.83% for the last four years, while median performance for pure index ETFs has experienced huge swings and has ranged from -40.09% to 55.59%, coinciding with the economic downturn and recovery.

Click here for the full article

ETF News

State Street Begins Asset-Allocation ETFs in Active Push

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State Street Corp. (STT), the second- largest manager of exchange-traded funds, opened three products that can spread money across a range of asset classes in a push into actively managed ETFs.

The funds will use tactical asset-allocation strategies and invest in ETFs including those run by State Street, James Ross, senior managing director of State Street Global Advisors, the Boston-based company’s money-management unit, said today at a conference in New York. The mix of underlying investments will include stocks, bonds, commodities and other asset classes.

“I can see active ETFs being a larger part of the ETF landscape,” Ross said. “We obviously plan to participate in that growing market.”

State Street, which introduced the industry’s oldest ETF in 1993, manages about $307 billion in the products, entirely in passive strategies. The firm’s active ETFs come about two months after Bill Gross became the most prominent fund manager to push into the industry. Gross’s Pimco Total Return Exchange-Traded Fund, which has beaten the bond market with a 3.3 percent return since it started on March 1, has gathered $540 million in assets.

Continue reading →