iShares: No Longer Just An Index-Based ETF Provider

by on June 18, 2010 | ETFs Mentioned:

The anticipation has been building throughout the last year in the ETF industry, with several of the world’s largest asset management firms laying the groundwork to roll out actively-managed ETFs. Big players in the mutual fund industry, including T. Rowe Price and Legg Mason, are among those crowding around the periphery of the ETF industry, preparing to make a run at what some predict will be the next big growth area for ETFs (see Handicapping The Active ETF Race).

Now there’s another name to add to that list: iShares, the San Francisco-based ETF giant that currently has more than $350 billion in passively-indexes products. The company recently made an exemptive relief filing with the SEC, seeking permission to roll out products that will “operate as actively managed ETFs.” The filing was light on details, noting that the proposed funds could include both equity and fixed income funds, as well as ETFs that invest in both asset classes.

The iShares product line currently consists of more than 200 ETFs, the vast majority of which seek to replicate well-known benchmarks in a variety of asset classes. The company does offer one product that differs from the rest of its product line; the iShares Diversified Alternatives Trust (ALT) is not intended to track the performance of any benchmark, seeking instead to maximize absolute returns from investments with historically low correlation to traditional asset classes. ALT implements three strategies popular among active management, including yield and futures curve arbitrage, technical momentum/reversal, and fundamental relative value. ALT has been relatively successful since its launch in late 2009; assets under management now exceed $60 million.

The actively-managed corner of the equity ETF market has been relatively slow to develop, as investors have opted to achieve exposure to stock picking strategies through mutual funds. PIMCO, however, has seen some tremendous success with its actively-managed money market like ETF; MINT now has more than $800 million in assets (use the ETF Screener to filter actively-managed ETFs from the universe of more than 1,000 funds).

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Disclosure: No positions at time of writing.