Russell Investments has wasted no time in making full use of its acquisition of U.S. One Inc. as it filed for 3 new actively-managed ETFs on February 2nd, which will be series of U.S. One Trust. Paul Hrabal, President of U.S. One, entered into an agreement with Russell on Jan 6, 2011 according to which Russell would acquire control of U.S. One, prior to the end of Q1 2011. Once that happens, Russell would become the investment advisor to the existing One Fund (NYSE:ONEF), as it will also be for the 3 new funds that are being planned.
Acquiring U.S. One has helped Russell speed up its product development efforts in the Active ETF space as it will no longer have to wait to receive exemptive relief from the SEC on its own, since it can now utilize U.S. One’s existing relief to issue new funds as part of the same series. This is should provide the company with a significant leg up over other large fund players like T. Rowe Price, Eaton Vance and Legg Mason that are still waiting in line to receive approval from the SEC for their own Active ETFs. When that happens is anyone’s guess at the moment, and in a world as competitive as the ETF industry, time-to-market can be enormously important.
Russell will be the investment advisor to all 3 funds that are being planned. All of these are fund-of-funds because U.S. One only has exemptive relief to launch actively-managed ETFs that are fund-of-funds. U.S. One had request approval from the SEC in August 2010 to expand its relief in order to allow for funds that can invest in individual securities, instead of just other ETFs, however the status of that application is unclear. Expenses to the funds have not yet been disclosed but the following details were provided for the funds’ investment strategies in the preliminary prospectus:
Russell Global Opportunity ETF (ONEO)
This fund will be a fund-of-funds that will look to achieve long-term capital growth by investing in other ETFs that exposure to equity, fixed-income, real estate, commodities, infrastructure or currency markets. Alongside the multi-asset class exposure, the fund will have a minimum of 30% portfolio exposure to non-US issuers through the underlying ETFs. Russell will employ an asset allocation strategy to provide exposure to multiple asset classes in both domestic and foreign markets.
Russell Bond ETF (ONEB)
This is also a fund-of-funds that will aim to achieve total returns by investing in other ETFs that track fixed-income securities issued by governments and corporations in the US, Europe and Asia as well as other developed and emerging markets.
Russell Inflation ETF (ONEI)
ONEI is another fund-of-funds that will look to provide total returns that exceed the rate of inflation over a full economic cycle by investing in underlying ETFs that provide exposure to inflation hedges. These include equities, TIPS, real estate, commodities and infrastructure assets.
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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