November was a choppy month for the markets, with concerns in the Euro-zone resurfacing with Ireland now in the hot seat and North Korea stirring up the international community with its aggressive moves again. The S&P500 was nearly flat on the month, while the NASDAQ was down more than 3% and the Dow down slightly more than 1%. As the month closed, volatility spiked as the market dropped two straight days in a row causing the VIX to jump more than 9% on the final day of November.
There was a lot happening in the Active ETF space as well in November, with PIMCO filing another new actively-managed bond ETF and Van Eck finally being granted exemptive relief from the SEC for its proposed Active ETFs. AdvisorShares also crossed the $100 million mark in terms of assets under management with its line-up of 4 actively-managed ETFs and soon to be 5 with the launch of the Peritus High Yield ETF (NYSE:HYLD) this week. We also saw Oppenheimer and Neuberger Berman join the list of major financial firms showing interest in Active ETFs. And probably most significantly, we saw Eaton Vance make a big move by acquiring Managed ETFs LLC, a firm co-founded by Gary Gastineau that owns patents for a new trading mechanism that would allow non-transparent actively-managed ETFs to become a reality.
In the month, we also spoke with a couple of portfolio managers behind actively-managed ETFs – Paul Hrabal, the President of One Fund and also David O’Leary, the CIO of AER Advisors and manager for two of PowerShares’ Active ETFs. Hrabal shed some light on where he plans to bring One Fund and plans for a future bond fund. O’Leary, who is running two of the oldest actively-managed ETFs in the US, chatted with us about his thoughts on the transparency requirements for Active ETFs and also on why more promotion is necessary for Active ETFs to take off.
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Active ETF assets in November increased by $550 million, getting close to the $3 billion mark across the 32 actively-managed ETFs currently trading on US markets. AdvisorShares’ latest fund on the market – the Cambria Global Tactical ETF (NYSE:GTAA) – really found its footing during the month, crossing the $50 million mark and becoming AdvisorShares’ largest fund in just over 4 weeks after launch. GTAA is managed by Mebane Faber, the author of the popular book “The Ivy Portfolio”. GTAA launch has been very much like the launch of the Mars Hill Global Relative Value ETF (NYSE:GRV) which also picked up steam quite quickly, but GRV has stagnated since September, with assets remaining at $43 million. We’ll have to wait and see if GTAA is able to avoid the “plateau”.
Another major mover was of course PIMCO’s Enhanced Short Maturity Fund (NYSE:MINT) whose asset base is a very good contrarian indicator for the general markets. Being a money market alternative, MINT’s asset base increases whenever market participants are looking to raise their cash allocations. November was such a month because of the volatile and choppy markets and investors moved to the exits. As a result, MINT’s asset base has nearly doubled from October to $844 million, which is the highest to date for the fund.
Finally, WisdomTree’s actively-managed ETFs have continued to gain traction as its Chinese Yuan Fund (NYSE:CYB) and Emerging Currency Fund (NYSE:CEW) both picked up an additional $37 million in assets. Its Emerging Markets Local Debt Fund (NYSE:ELD) continues to impress as it picked up $63 million more of investor money, bringing its total size to $439 million, just 3 months after launch.
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In Canada, AlphaPro expanded its line-up of Active ETFs by launching the AlphaPro Preferred Share ETF (HPR) in the closing week of the month. Overall though, other than with the AlphaPro Corporate Bond ETF (HAB) which has $278 million in assets, the company has had a hard time achieving any sort of traction with investors. Most of its funds are still hovering around their seed capital of $10 million with only the Gartman Fund (HAG) and the Seasonal Rotation Fund (HAC) getting some minor traction. This is despite the fact that Horizons AlphaPro has had a continued monopoly on the Active ETF space with no competition from other ETF providers in Canada, who have chosen to stay out of actively-managed ETFs so far.
New Entrants, Filings and Closures:
1. PIMCO files for Inflation-Linked Bond Active ETF – direct link
2. JP Morgan amends filing to remove derivatives – direct link
3. State Street eliminates derivatives from application – direct link
4. Neuberger Berman files for launch of Active ETFs – direct link
5. Oppenheimer considers entering Active ETF space through mutual fund conversion – direct link
6. AdvisorShares files for 3 funds with Madrona Funds – direct link
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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