New ETF provider Grail Advisors, which last month launched the first qualitative actively managed ETF, now has plans to expand its lineup even further this year.
The four ETFs being filed represent the industry’s first actively managed ETFs that take a single-manager approach. Grail’s first ETF, Grail American Beacon Large Cap Value (GVT), is managed by three veteran mutual fund and institutional subadvisors.
The four new funds are:
- RP Growth
- RP Focused Large Cap Growth
- RP Technology
- RP Financials
The goal, as with all actively managed ETFs, is to combine all the benefits of ETFs (low cost, transparency, tax efficiency and more) with the benefits of getting actively managed strategies from veteran stock pickers. Trading in the new funds is expected to begin on the NYSE Arca on Sept. 1.
RiverPark Advisors LLC will service as the primary sub-advisor for each of the funds.
William Thomas, Grail’s CEO, said they saw these four funds as the next step in the ETF evolution. “There’s been a tremendous amount of talk about who will have the first single manager active ETFs, so by doing this with RiverPark, we’ve done that.”
Morty Schaja, RiverPark’s CEO, comes from the world of mutual funds, but he’s not leaving the active management style behind.
“We’re trying to say we can deliver the actively managed formant, but with all the benefits people have grown to expect from ETFs,” Schaja says. In order to do that, RiverPark sought out managers who were willing to embrace full transparency and the disclosure of their ETF’s portfolio each evening.
Schaja says they wanted to walk before they run, so they’re starting off with relatively concentrated portfolios, relatively liquid holdings, manageable turnover of no more than 100% per year (as opposed to 300-400% a year).
“We totally embrace those constraints. The concept of full transparency is something we’re very, very comfortable with,” Schaja says.
The managers for each fund will have discretion on a daily basis to choose securities for the ETF’s portfolio that are consistent with the fund’s investment objective. All holdings in the fund will be disclosed daily.
Thomas acknowledges recent reports that actively managed ETFs have been slow to gain assets, but he sees a lot of potential for that to change as investors learn more about active ETFs and assets trickle back into the markets.
“What we’ve learned is that advisors and investors definitely get it when you explain. They understand the benefits and that gets them interested,” Thomas points out.
Couple that with a large pool of money sitting on the sidelines waiting to be redeployed, and it could lead to a flood of interest in actively managed ETFs.
Each of the funds will have an expense ratio of 0.89%, which is less than expense ratio of the average mutual fund.
Grail also plans to follow up its first offering this summer with the Grail American Beacon International Equity, which is the first international ETF of its kind.
Grail says their new funds are the latest in what’s expected to be a series of offerings from them. From here, Thomas says, Grail is going to assess the market’s needs as they move forward with more funds.