U.S. One / Russell Planning More ETFs

by on February 7, 2011 | ETFs Mentioned:

After announcing the acquisition of Reno-based U.S. One last month, Russell has wasted little time utilizing its new-found flexibility to beef up its already hefty product pipeline. U.S. One Trust recently disclosed plans to the SEC for three new Russell ETFs, each of which would be structured as a fund-of-funds. The proposed ETFs include:

  • Russell Global Opportunity ETF (ONEO): The stated investment objective is “to provide long-term capital growth,” and this fund would invest in ETFs that offer exposure to various asset classes including equity, fixed income, real estate, commodities, infrastructure, and currency markets. According to the filing, at least 30% of assets will be invested in securities of non-U.S. issuers.
  • Russell Bond ETF (ONEB): This fixed income ETF simply seeks “total return,” and the filing notes that ONEB could invest in ETPs that offer exposure to government issued debt, investment grade corporate bonds, junk bonds, mortgage and asset backed securities, including debt of governments and corporations in the U.S., Europe, Asia, and other developed and emerging markets.
  • Russell Inflation ETF (ONEI): Seeking to deliver a total return that exceeds the rate of inflation over an economic cycle, ONEI would have the flexibility to maintain exposure to various asset classes through ETPs. IndexIQ already offers a Real Return ETF (CPI) that maintains a similar investment objective and methodology.

Prior to its acquisition of U.S. One, Russell had filed for exemptive relief to launch its own line of passive and active ETFs [see Russell Planning Major ETF Push]. But an extended review of the use of derivatives in mutual funds and ETFs has ground the approval process to a halt; gaining “exemptive relief” to launch exchange-traded products once took about six months, but many would-be issuers have been waiting for more than a year for approval. Many firms that have filed for exemptive relief to launch active ETFs have amended applications to exclude the use of derivatives in their products, hoping that avoidance of the suddenly controversial securities would speed up the approval process [see Ten Proposed ETFs To Be Excited For In 2011].

The “deep freeze” on exemptive relief requests has created strategic advantages (and potentially valuable assets) for those firms that have already been granted permission to introduce actively-managed ETPs. There are currently a handful of active ETF issuers, including AdvisorShares, WisdomTree, Grail, PIMCO, PowerShares, and U.S. One. Russell’s move to acquire U.S. One was likely driven in part by a desire to speed up its ability to launch Russell-branded ETFs. U.S. One currently offers the One Fund (ONEF), an actively-managed fund that offers exposure to global equity markets through an ETF-of-ETFs structure.

Disclosure: No positions at time of writing.