The world of actively managed exchange traded funds continues luring some of the fund industry’s largest names. BNY Mellon Investment Management is the newest to throw its hat in the ring.
The firm filed plans with the Securities and Exchange Commission (SEC) for three actively managed ETFs targeting various sustainability objectives.
“The three — BNY Mellon Sustainable US Equity ETF, BNY Mellon Sustainable International Equity ETF and BNY Mellon Sustainable Global Emerging Markets ETF — are sub-advised by Newton, a leading equity and multi-asset manager with more than four decades of sustainable and responsible investing experience,” according to Investment News.
Actively managed exchange traded funds may be having their moment.
Active ETFs “gathered net inflows of US$16.90 billion during February, bringing year-to-date net inflows to a record US$33.80 billion. Assets invested in actively managed ETFs and ETPs finished the month up to 4.9%, going from US$303 billion at the end of January to a record US$318 billion,” according to ETFGI.
The Flexibility of Active Management
Further stoking inflows to active ETFs are mutual fund issuers entering the ETF space, some of which are converting established actively managed mutual funds to the better-serving ETF structure.
The BNY funds target environmental, social, and governance (ESG) themes at a time when that concept is increasingly relevant to advisors and clients.
“In addition to investing in companies that Newton believes are ‘sustainable’ after applying the fundamental analysis and ESG quality review rating, Newton may invest in companies where it believes it can encourage sustainable business practices through ongoing company engagement and active proxy voting consistent with Newton’s investment and engagement priorities,” according to BNY’s SEC filing. “Newton monitors the fund’s entire portfolio for emerging environmental, social or governance controversies and issues and may update a company’s ESG quality review rating. This integrated investment process is intended to ensure that ESG issues are taken into account and that the fund invests in companies with attractive fundamental investment attributes that adopt, or are making progress towards, sustainable business practices. The fund will not invest in companies that Newton deems to have material environmental, social or governance issues that Newton believes are intrinsic to their business activities (i.e., that cannot be corrected through ongoing company engagement and active proxy voting).”
For more on active strategies, visit our Active ETF Channel.