As the industry continues to grow at a remarkable pace, it seems that more and more mutual fund companies are beginning to see the inevitable dominance of exchange traded funds, finding it preferable to join a movement that they may not be able to beat. Although many of the largest ETF issuers were traditionally mutual fund powerhouses, most active managers were hesitant to jump into the ETF game, betting that indexing might never truly grab hold. But more and more fund companies have joined the fray in recent years–Charles Schwab (NYSE:SCHW), Fidelity, and even bond fund giant PIMCO just to name a few–and even more are laying the groundwork for an ETF expansion.
And this past week saw another well-known active manager throw its hat into the ETF arena; according to a recent filing with the SEC, Janus Capital Group (NYSE:JNS) appears to be preparing to make the jump into the ETF world. The Denver, Colorado based company has dozens of mutual funds with more than four million shareholders with close to $150 billion in assets with the company.
The filing discusses both equity and fixed income funds, as well as ETFs focusing on the international market. It’s interesting to note that Janus committed to avoiding the use of swaps, options, and futures in proposed ETFs. That decision seems increasingly common among would-be issuers, as the SEC’s review of mutual funds and ETFs using derivatives continues to drag on.
The recent filing seeks ‘exemptive relief’ which grants ETF firms exception to sections of the Investment Act of 1940 and is one of the first steps in bringing ETFs to market. The earliest that Janus could roll out its first ETF would likely be the second quarter of 2011.
While Janus is late to the ETF game, the actively-managed ETF boom is yet to take off; by our count, there are only 25 active ETFs on the market today–and only 17 if the active currency suite from WisdomTree (WSDT.PK) is excluded. With a number of prolific mutual fund managers gathering around the periphery of the ETF space–including Legg Mason (NYSE:LM), T. Rowe Price (NASDAQ:TROW), and Eaton Vance (NYSE:EV)–the active ETF space seems poised to explode in coming years as these established firms make the leap.
Disclosure: No positions at time of writing.
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