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Active ETFs gather momentum as asset managers eye mutual fund conversion
Brown Brothers Harriman is working with Guinness Atkinson Asset Management for the first conversion of two mutual funds to become active ETFs .
The active exchange traded fund ( ETF ) is gathering momentum with asset managers looking to convert some of their mutual funds to the structure . Guinness Atkinson Asset Management is set to become the first investment firm to convert two mutual funds with assets of $ 21 million to the cheaper and more tax-efficient ETF structure , taking place on 26 March .
Brown Brothers Harriman ( BBH ), the custodian and fund administrator for Guinness Atkinson , has been working with the firm to carry out this conversion . The conversions will see the Guinness Atkinson Dividend Builder Fund ( GAINX ) and Guinness Atkinson Asia Pacific Dividend Builder Fund ( GAADX ) become the Smart- ETFs Dividend Builder ( DIVS ) and Smart- ETFs Asia Pacific Dividend Builder ( ADIV ), respectively . Current mutual fund investors will automatically become shareholders of the new actively managed ETFs . Elsewhere , Citi is working with quant giant Dimensional Fund Advisors to switch six mutual funds with total assets of $ 20 billion , to the active ETF wrapper during this year . “ Moving assets from a mutual fund custody account to a new ETF account is a substantial operational conversion ,” said Shawn McNinch , global head of ETF product and sales , BBH . “ This is getting a lot of attention , and we are having a lot more conversations with mutual funds managers with this conversion .”
While the active ETF market only represents 3 % of the $ 8 trillion ETF industry , the moves represent a major milestone as it looks to compete against the struggling mutual fund market . According to data from Morningstar , long-term mutual funds saw inflows of $ 212 billion , way below the $ 356 billion average inflow from 2010-2019 . Mutual funds were particularly hit hard during the height of the pandemic where investors pulled a record $ 336 billion of assets from them . That being said , actively managed ETFs also took a hit of $ 188 billion for the year , despite seeing inflows of $ 27 billion in December . “ With our mutual fund clients , especially the ones that have been sitting on the sidelines on the ETF market , we have seen an uptick in 2020 of new managers entering the active ETF market . Over 30 new managers entered the market last year that were focused on active strategies ,” added BBH ’ s McNinch . The introduction of non-transparent ETFs last year has also garnered the attention of both active and passive asset managers , as it enables them to avoid daily disclosure of their holdings .
12 Global Custodian Spring 2021