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Mutual Fund Firms Picking Up The ETF Game


The upstart exchange traded fund industry has been slowly chiseling away at mutual funds’ market share. However, traditional fund providers are taking action, creating ETF teams of their own as a precursor for potential future launches.

J.P. Morgan Asset Management, Principal Funds, Legg Mason and Goldman Sachs Asset Management have hired leaders and experts in the field to focus on ETF strategy and managing necessary relationships with traders, exchanges and other participants, reports Jackie Noblett for Ignites.

J.P. Morgan Asset Management has already launched three international ETF investments, including the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) , JPMorgan Diversified Return Global Equity ETF (JPGE) and JPMorgan Diversified Return International Equity ETF (JPIN) . [J.P. Morgan’s New EM ETF Challenges Conventional Rivals]

Principal Funds launched its first ETF, the Principal EDGE Active Income ETF (YLD) , earlier in July. [Principal Financial Enters ETF Fray With Multi-Asset Fund]

Legg Mason has filed with the Securities and Exchange Commission to launch alternative, smart-beta index exchange traded funds. [Legg Mason Is Considering Smart-Beta ETF Strategies]

Goldman Sachs has been given SEC approval to launch active and passive ETFs. The firm has filed for five passively hedge fund-type ETFs and six actively managed ETFs under the “ActiveBeta” brand. [Goldman Sachs Wins SEC Approval for ETFs]

The financial industry is beginning to recognize the importance of ETFs. According to a 2014 PwC survey, over two-thirds of asset managers said it was important for a firm to have an ETF strategy, regardless of whether they offer products.

In playing catchup, mutual funds have had to adapt to the different way the ETF industry does business. For instance, poorly defined strategies and insufficient commitment of resources, notably on the distribution side, have caused the unprepared to burn out early.

“You need people who understand the nuances of the ETF business and what it takes,” Jennifer Muzerall, senior analyst at Cerulli Associates, said in the FT article. “If you really build out the structure and you have an executive focused on ETF strategy and how it fits in with the overall business, you’re not taxing the time and the resources of your mutual fund team.”

Alternatively, some companies have outright acquired a smaller ETF firm in their foray into the ETF industry. Janus acquired VelocityShares and New York Life bought IndexIQ last year. [New York Life Makes ETF Debut With IndexIQ Acquisition]

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.