Over the last twelve months, dozens of active management powerhouses have begun laying the groundwork for a foray into the ETF industry, leading many to believe that an active ETF growth spurt is on the horizon. One of those firms, Boston-based John Hancock, recently shed some additional light on its plans for the ETF space, revealing that its first fund after receiving approval of its exemptive relief application will consist of both domestic and international equities and fixed income securities.
The John Hancock Global Balanced Fund would invest about 60% of its assets in equities, with the remainder in bond securities. But perhaps the more interesting details from the recent SEC filing were in language regarding securities in which the fund will not invest. “Neither the Initial Fund nor any Future Fund relying on the Order will invest in options contracts, futures contracts or swap agreements, except to the extent permitted by the Commission and/or its staff in the future,” reads the recent filing, indicating that Hancock is calling an audible from its ETF playbook in response to the current environment.
Earlier this year the SEC indicated that it was investigating the use of swaps and other derivatives by ETFs and mutual funds, freezing the approval of exemptive relief applications until further information is gathered. While the SEC’s review appeared to be driven in part by concerns over the suitability of leveraged ETFs, it has also clogged the active ETF pipeline, since many non-indexes providers had indicated that proposed products would have the latitude to use derivatives products.
In addition to John Hancock, a number of other well-known financial players have taken the first steps towards launching ETFs; Legg Mason and T. Rowe Price are among those expected to launch active ETFs in the not-so-distant future. Earlier this month, iShares filed for approval on active ETFs, indicating that the market leader in the passive ETF space may be preparing to dabble in the active arena as well (see Handicapping The Active ETF Race).
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Disclosure: No positions at time of writing.