Expect Guggenheim Investments
to expand its profile in actively managed bond ETFs.
The money manager treated a handful of reporters to a lunch at Aquavit in Manhattan on Wednesday afternoon, hosted by head of product development Bill Belden
and portfolio strategist Tony Davidow
. Belden and Davidow talked about their plans for new products and gave their take on the state of the ETF business -- closures, fee wars, and the industrywide changes that they see coming.
The two opened with a discussion of Guggenheim's defined-maturity bond ETFs
, saying that they plan to expand the line with more laddered maturity dates -- and even to apply the same strategy to other asset classes.
"The maturity of the first ETF last year really validated the concept," said Belden, noting that they've had only one redemption in the institutional grade in the two years the funds have been in existence.
Guggenheim's plans for new ETFs also will also focus on actively managed fixed income funds. The firm already offers two active ETF strategies and has four more "on file," according to Belden.
"By the very nature of it, fixed income has an active component," said Davidow. "Even if Bill Gross publishes his holdings daily, I guarantee that you or I couldn't go out and replicate that."
Both Belden and Davidow said that the success of Pimco's Total Return ETF
is a bellwether of the industry -- Belden called its success a "stamp of approval" on actively managed bond ETFs. He said that Guggenheim filed for a similar total-return bond ETF about a year and a half ago, but the SEC still has not approved it.
The talk turned to the big stories of the last few months: fee compression and the raft of fund closures this year.
Describing Guggenheim as an "interested observer" in the fee war, Belden said that the firm won't participate in the "race to zero" taking place between Vanguard, BlackRock, and Schwab. Low fees, he noted, don't guarantee success, and are only one factor in a fund's appeal to an advisor or investor.
"We think we earn our fee," added Davidow.
Both men cast the recent departures of firms like Russell
from the ETF field in a positive light. Davidow called it a "cleansing process," while Belden said it was a "healthy evolution" that "raises the bar for new entrants in the market" -- and, he added, with firms like Fidelity
and Eaton Vance
hoping to win ETF market share, consolidation is inevitable.
"We're going to see these smaller firms go away or get acquired, because they might have some exemptive relief that's of value," said Davidow.
Finally, they talked about the role of ETF market makers, and the need for the industry to better educate advisors about what's "under the hood" of exotic and less liquid products.
"There is going to be an outlier that blows up and impacts the rest of the business," Belden predicted.
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