On Nov 11th, AdvisorShares announced in a press release that the assets managed within its 4 actively-managed ETFs now exceed $100 million. AdvisorShares pioneered the launch of many unique strategies including long/short funds and global tactical funds that were previously accessible mainly through hedge funds with high barriers to entry for investors.
AdvisorShares’ current position marks a big leap from where it was earlier this year when the company only had one fund on the market whose asset growth had reached a plateau. The very first product that the firm launched was the Dent Tactical ETF (NYSE:DENT) which hit the market in September 2009 to much anticipation as the fund was managed by Harry Dent, known for “The Dent Method” which is used to forecast long-term economic trends. The fund had gathered $25 million by March 2010 but has since stopped growing with assets continuing to hover between $20-25 million. There was little of note coming from AdvisorShares after the launch of DENT for quite a while, until the Mars Hill Global Relative Value ETF (NYSE:GRV) and the WCM/BNY Mellon Focused Growth ADR ETF (NYSE:AADR) were launched in July this year. Both were industry firsts with GRV being the first long/short relative value ETF while AADR was the first internationally focused actively-managed ETF. GRV in particular gained strong favour with investors as it gathered in excess of $40 million in assets in little over a month. The latest fund to be launched from AdvisorShares was the Cambria Global Tactical ETF (NYSE:GTAA) in October, which is managed by another popular portfolio manager – Mebane Faber, the author of the book “The Ivy Portfolio”. GTAA has even left GRV in the dust, having already gathered $40 million in assets in about 2 weeks, in the process helping AdvisorShares’ total AUM exceed $100 million.
AdvisorShares has built up a reputation for bringing unconventional active strategies to investors which bear resemblance to hedge-fund style management instead of just plain-vanilla mandates. At the same time, it has also built up a reputation for bringing some very expensive products to market, with its “cheapest” Active ETF charging investors 1.25% in expenses with the most expensive at 1.56%. That is almost comparable to many active mutual funds, but from AdvisorShares’ point of view, it is charging for the unique strategies that it is providing investors access to. While it is still early years as a whole for the Active ETF space, the response that AdvisorShares’ is seeing for its more exotic long/short and tactical offerings may provide indications that investors do have an appetite for expensive products provided the strategy is unique enough.
Of course, at the end of the day, the long-term track record that the portfolio managers develop would likely end up being the biggest determinant of success for these active funds. In that regard, only one of AdvisorShares’ offerings, AADR, has been able to outperform its benchmark since inception. DENT and GRV have both underperformed their benchmarks by large margins. While not entirely fair to judge active manager on such a short time span, the managers will have to pull up their socks if the funds are to continue attracting assets.
AdvisorShares also has some more interesting products in the pipeline. The Peritus High Yield ETF (NYSE:HLYD) is scheduled for launch in December and will be the first Active ETF to focus on the high yield bond market. Another is a short-only equity fund called the Active Bear ETF (NYSE:HDGE). AdvisorShares is also collaborating with Strategic Investment Management (SiM) to plan two more actively-managed ETFs. That pipeline should ensure continuing activity from AdvisorShares in the next few months.
Written By Shishir Nigam from ActiveETFs | InFocus Disclosure: No positions in above-mentioned names.
Shishir Nigam is the founder of ActiveETFs | InFocus (http://www.etfshub.com/), which provides extensive coverage and analysis of actively-managed ETFs in US and Canada, including debates on major industry trends, insights on the latest product launches from issuers in the Active ETF space as well as in-depth interviews with industry executives and thought leaders.
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