State Street Corp., the second-largest manager of exchange-traded funds, opened three products that can spread money across a range of asset classes in a push into actively managed ETFs.
The funds will use tactical asset-allocation strategies and invest in ETFs including those run by State Street, James Ross, senior managing director of State Street Global Advisors, the Boston-based company’s money-management unit, said today at a conference in New York. The mix of underlying investments will include stocks, bonds, commodities and other asset classes.
“I can see active ETFs being a larger part of the ETF landscape,” Ross said. “We obviously plan to participate in that growing market.”
State Street, which introduced the industry’s oldest ETF in 1993, manages about $307 billion in the products, entirely in passive strategies. The firm’s active ETFs come about two months after Bill Gross became the most prominent fund manager to push into the industry. Gross’s Pimco Total Return Exchange-Traded Fund, which has beaten the bond market with a 3.3 percent return since it started on March 1, has gathered $540 million in assets.
State Street joins Pacific Investment Management Co., BlackRock Inc. and at least two dozen money managers that are vying for a slice of the active ETF business, which accounts for less than 0.5 percent of the $1.06 trillion in U.S.-registered ETF assets as of Feb. 29, according to the Investment Company Institute.
The new asset-allocation ETFs are the Multi-Asset Real Return ETF, which has an annual expense ratio of 0.7 percent, the Income Allocation ETF, which also charges 0.7 percent, and the Global Allocation ETF, which costs 0.35 percent. The funds will be managed by State Street’s investment solutions group, which runs more than $160 billion in strategies that allocate money across a range of assets.
ETFs typically hold baskets of securities while trading throughout the day like stocks, instead of being priced once a day like most mutual funds. Active versions seek to combine the skill of fund managers in selecting securities with the lower fees, market trading and tax advantages of ETFs. Passive products, which seek to closely track market benchmarks such as the Standard & Poor’s 500 Index, dominate the business.