Despite the Flash Crash speed bump, ETF assets and new fund launches have been growing at a tremendous pace over the summer months; a variety of funds targeting new locales or bringing fresh ideas to investors have hit the market in recent weeks, further dispelling the myth of an “ETF Bubble.” Beyond the most recent product launches, the number of firms crowding around the entrance to the ETF industry continues to grow, as several mutual fund companies have laid the groundwork for a foray into the ETF space. Janus Capital Group recently joined T. Rowe Price, Dreyfus, and Legg Mason–among others–on the list mutual fund companies preparing to play catch-up in the ETF game.
Now we can add another name to that list. Last week, The Hartford Financial Services Group made an SEC filing seeking exemptive relief to offer actively managed ETFs, including a fund focusing on both American and international investment-grade debt. The company said in the filing that its first fund’s investment objective is to seek total return. The ETF may own debt of any maturity, denominated both in dollars and foreign currencies and coming from developed as well as emerging markets. The filing also discusses some of the possible advantages of this strategy including the tax advantages over a tradition mutual fund, ease of use by short-term investors, and more timely liquidity than mutual fund products.
It is important to note that the company will not use derivatives or other complex financial instruments such as swaps, options or futures. By acknowledging this limitation, The Hartford Group may be able to dramatically streamline the approval process; the SEC has been staging a thorough review of derivatives in ETFs, recently extending the approval time significantly for all proposed funds that utilize these securities [see ETF alternatives for Hartford mutual funds by using the new Mutual Fund to ETF Converter Tool].
The Hartford Group posted revenues of close to $25 billion last year, is currently a Fortune 100 member, and is one of America’s largest financial service companies with over $380 billion in assets under management. Much like Janus, Hartford is late to the ETF game but can still make headway in the extremely underdeveloped actively managed ETF market. Only 25 actively managed funds currently exist, and for the most part these products have been slow to gain assets. Currently the largest actively-managed equity ETF by total assets is the Mars Hill Global Relative Value ETF (GRV), which has a little more than $40 million in assets [also read Ten Intriguing ETF Storylines].
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Disclosure: No positions at time of writing, photo is courtesy of Sage Ross.