You might think most large-scale firms that offer mutual funds have already entered ETF market. However, in April, we should be even closer to that being a reality. Raymond James Investment Management (RJIM) recently filed to offer its first four ETFs leveraging the expertise of a few of its wholly owned boutique managers.
In July 2024, Mo Sparks was named of exchange traded funds for RJIM. He has extensive ETF experience working at the New York Stock Exchange and Vanguard. Sparks and team have been working hard to build out a lineup of ETFs initially focused on income generation. However, we expect more products to arrive later in 2025 and in 2026 focused on other approaches.
Raymond James Offers Strong Suite of Active Strategies
RJIM has more than $100 billion in assets under management, a subset through actively managed mutual funds. Those include the Carillon Eagle Mid Cap Growth Fund and the Carillon Scout Mid Cap Growth Fund, which recently managed $6 billion and $3 billion in assets, respectively. While Raymond James provides wealth management advisory services for investors, its mutual funds and ETFs will be available for all.
The pending ETFs will use the RJ brand, not the Carillon one, to help advisors and investors differentiate them. However, they tap into the expertise of boutiques that offer mutual funds and separately managed accounts. All of them will be fully transparent active ETFs that have no comparable mutual fund companion.
Income ETFs on the Way
Three of the ETFs will be run by the Eagle Asset Management, a team managing assets since 1984. Those are the RJ Eagle Municipal Income ETF, the RJ Eagle GCM Dividend Select Income ETF, and the RJ Eagle Vertical Income ETF.
The RJ Eagle Vertical Income ETF caught my attention. According to the prospectus, the fund will primarily invest in investment-grade corporate bonds issued by companies included in the Bloomberg US Corporate Index. However, the fund will opportunistically invest in a company’s common stock and preferred securities, rather than its debt securities. Most income ETFs focus on common stocks, preferreds or corporate bonds, not a combination.
Meanwhile, the RJ Chartwell Premium Income ETF will be run by Chartwell Investment Partners. Chartwell has been managing money since 1997. The ETF plans to invest in generally 30-40 large-cap stocks and write covered call options on each position.
Growing Appetite for Active ETFs
We think RJIM’s approach is similar to the one Morgan Stanley undertook years ago. The firm now has more than a dozen ETFs, tied to different in-house brands, and manages more than $7 billion in assets. Capital Group and T. Rowe Price are among the other firms having success with active ETFs.
At this time, there are no fees or tickers listed for the four initial RJIM ETFs. VettaFi expects the firm to soon tap into the expertise of other boutiques under the RJIM umbrella. For example, Reams Asset Management offers core and core-plus fixed income mutual funds. Meanwhile, ClariVest Asset Management offers an international equity mutual fund.
We believe that while the ETF industry is more than 30 years old, advisor demand for actively managed ETFs is still in the early stages. While active ETFs garnered more than 25% of net inflows in 2024, they still represent approximately 10% of industry assets. Firms like Raymond James Investment Management can build a strong base in part by educating advisors about their active management expertise.
For more information, please visit VettaFi.com | ETF Trends.
