Exchange Traded Concepts, the Oklahoma City-based firm that puts exchange-traded funds into registration on behalf of third-party fund sponsors, has won the right to market actively managed ETFs, raising competition in the growing field of third-party vendors.
ETC is now behind a total of five index ETFs, including the $172 million Yorkville High Income MLP ETF (YMLP). Winning “exemptive relief” to expand into active ETF strategies positions the company to focus on what some analysts consider to be the next frontier of ETF development.
Exchange Traded Concepts, which said it is likely to put actual active funds into registration in the coming weeks, will now compete head-on with AdvisorShares, a Bethesda, Md.-based ETF firm that has been marketing active ETFs on behalf of other fund managers since it was founded a number of years ago. AdvisorShares is behind 18 active ETFs that together have $817.1 million in assets, according to data compiled by IndexUniverse.
ExchangeTraded Concepts is also competing with FactorShares, another “white label” firm that puts ETFs into registration for other parties. It already offers eight index strategies that together have $14.7 million in assets. It too plans to help others offer active strategies and, possibly, even exchange-traded notes, executives at the firm have told IndexUniverse.
Active ETFs have yet to truly take off, and make up less than 1 percent of the $1.453 trillion in total U.S.-listed ETF assets. The single biggest active ETF to date is the Pimco Total Return ETF (BOND) that is managed by bond-investing legend Bill Gross.
Many in the ETF industry believe the success of BOND has more to do with Gross himself rather than the allure of active ETFs per se, meaning some sponsors will market such strategies using marquee names to improve a given fund’s chances of collecting significant assets.
The exemptive relief ETC has won means the firm has gained exception to sections of the Investment Company Act of 1940 and is just the first step in the path to launching ETFs. It often takes more than a year from the date of the initial filing for a company’s first ETF to hit the market, though the SEC is considering loosening exemptive relief requirements, according to a Reuters report .
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