Active ETFs: The Month in Focus

Includes: ALT-OLD, MINT, PQY
by: Shishir Nigam

In the inaugural edition of these monthly updates, we’ll capture and summarize all of the major moves that happened in the Active ETF landscape, both in the United States and Canada, in the month of March. We start by looking at changes in the Assets Under Management (AUM) numbers.

AUM Moves:

(Click each table to enlarge)

The two tables above show the major changes in money flows that have taken place amongst the various Active ETFs on the market. Only 3 Active ETFs experienced any material change in assets.

First, iShares’ Diversified Alternatives Trust (NYSEARCA:ALT-OLD) gained a strong $19.8million in new assets during the month of March. This is impressive growth relative to most other Active ETF products on the market, especially given that ALT launched only on November 16, 2009. Being the only Active ETF that gives investors exposure to hedge fund-like strategies across various asset classes is a likely pull factor for investors searching for a unique strategy. With the SEC increasing scrutiny on proposed ETFs which utilize derivatives heavily (as ALT does), this too will work in ALT’s favour as existing ETFs are not going to be affected by the SEC’s derivatives review.

The biggest spike in assets this month expectedly came from PIMCO’s Enhanced Short Maturity (NYSEARCA:MINT), increasing by $56.2 million. MINT has been on a very strong trajectory since its launch, no doubt helped by the strong reputation that PIMCO brings from active management in the fixed-income space. With short-term treasuries providing ultra-low yields, investors looking to park their cash somewhere have an incentive to seek out some additional income potential, something that MINT has been providing over its benchmark.

Finally, PowerShares’ Active AlphaQ (NYSE:PQY) has seen a flurry of activity in March, carrying on from its strong in-flows in February with assets now standing at $24.8million. Michael Johnston, over at ETFdb, provides a good look into this recent interest in PQY. In aggregate, the US Active ETF space now stands at approximately $362 million.

In comparison, the Canadian Active ETF space has hardly moved, with Horizons AlphaPro still being the only player in the market. Assets continue to hover around $99 million.

Industry Moves:

1. The SEC announced on March 26th that it will be initiating a derivatives review that will look more closely at proposed ETFs that plan to heavily utilize derivatives, such as forwards, options, futures and swaps in order to achieve their investment mandates. As a result, filings and approvals for leveraged and certain actively-managed ETFs could be delayed. Read the full details here.

2. With the number of players planning to enter the Active ETF space growing quickly, ActiveETFs | InFocus did a thorough analysis of the existing Active ETF space and also of all the players that are planning to enter or are already in the market. The analysis lead to some interesting conclusions on which players could end up leading this Active ETF race – it can be found here.

3. The focus also turned to the Canadian Active ETF market, which unlike the US market, is currently monopolized by one player – Horizons AlphaPro. We took a detailed look at what could be in store for Active ETFs in Canada and also spoke to AlphaPro’s President, Ken McCord, on how they are preparing for more competition.

New Entrants and Offerings:

1. Nottingham Co. files for Spinnaker FAS Managed Equity ETF – direct link.

2. JP Morgan files to launch Active ETFs – direct link.

3. confirms April launch of 2 new Active ETFs by April – direct link.

4. Eaton Vance targets PIMCO with 5 Active Bond ETFs – direct link.

Disclosure: No positions in above-mentioned names.