Dimensional | 6/14/2021
Because… DFA amassed $1 billion of ETF assets at the end of March 2021, which was already impressive for a latecomer considering three funds were not even five months old. The conversion of four mutual funds, which had approximately $30 billion of assets, will instantly turn the firm into the 13th largest ETF issuer. DFA will also become the top player in the active semi-transparent ETF space. We expect more asset managers to follow suit because it not only provides an immediate boost in ETF assets, but also brings the funds’ established track records to the new investment structure. The conversion will result in a management fee reduction, ranging from 20% for U.S. Core Equity 2 ETF to 56% for U.S. Equity ETF. The expense ratios for the new ETFs are not the lowest compared to index-based ETFs, but they are very competitive among active semi-transparent ETFs. DFA parted with $8.8 billion this year through April after bleeding $37.7 billion in 2020. The newly converted ETFs may attract and retain assets and slow down investor withdrawals.
Financial Times | 6/14/2021
Because… BlackRock’s ETF assets topped $3 trillion when industry assets surpassed $9 trillion, which means the firm alone accounted for about one-third of global ETF assets. The deal to acquire Barclays Global Investors in 2009 helped the active asset manager build a large-scale ETF business. BlackRock has remained a dominant player since. Its ETF assets have grown more than six-fold from $495.5 billion at the time of acquisition to more than $3 trillion. BlackRock now offers a wide array of ETFs, which enhances sales diversification and lessens the firm’s reliance on a small group of funds. BlackRock regularly reviews its lineup and terminates funds with small assets, enabling it to shift focus to investment solutions that can truly address evolving market needs and allocate marketing and distribution resources to those with more growth potential. BlackRock has also been in the forefront of product innovation. From smart beta to ESG funds, from target maturity bond funds to thematic ETFs, it is committed to the delivery of more ETF solutions.
Fidelity | 6/16/2021
Because… Among five new actively managed ESG funds, two are semi-transparent ETFs. Incorporating ESG criteria into the active semi-transparent structure has become the latest trend. American Century is the first issuer that brought semi-transparent ESG ETFs to the market. Sustainable Equity ETF and Mid Cap Growth Impact ETF made their debut in July 2020, with respective expense ratios of 0.39% and 0.45%. Invesco introduced two active semi-transparent ESG ETFs in December 2020. US Large Cap Core ESG ETF and Real Assets ESG ETF charge 0.48% and 0.59%, respectively. Stance Equity ESG Large Cap Core ETF, which was rolled out in March 2021, has the highest expense ratio of 0.85%. Putnam launched Sustainable Leaders ETF and Sustainable Future ETF before the end of last month. The two funds are priced at 0.59% and 0.64%, respectively. Fidelity’s two new ESG ETFs also have a fee of 0.59%. Since active ETFs are typically more expensive than their passively managed counterparts, they need to generate better returns in order to win over investors.