BNY Mellon’s first active ETF to invest in international equities
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BNY Mellon Investment Management’s first active exchange traded fund will be an international equity product, the group has disclosed. The asset manager believes it can capitalise on strong demand and product gaps in global equities with one of its specialist managers, executives said.
The company plans to launch the Concentrated International ETF, which will be fully transparent and will invest in 25 to 30 companies in developed markets outside of the United States.
Walter Scott, a subsidiary of BNY Mellon, will subadvise the portfolio.
The fund’s fees and expenses were not disclosed, and company executives would not comment on the pricing. However, they noted that the low costs of the company’s passive products would complement its active ambitions.
“The two work in tandem to help manage the overall cost of a portfolio,” said Matthew Camuso, ETF strategist at BNY Mellon Investment Management. Low-cost and zero-fee ETFs “free up the fee budget for areas like international equities, and they can use that and stay within our enterprise”.
BNY Mellon made its ETF debut last year with a series of ultra-low-cost ETFs, including its zero-fee Large Cap Core Equity and Core Bond ETFs. The eight funds collectively had $845m in assets under management at the end of June, according to Morningstar Direct data.
Together, the ETFs have attracted $282m during the first half of 2021, according to Morningstar’s database. Its $82.7bn long-term open-end mutual fund line, meanwhile, lost $422m during the same period.
Executives at the New York-based manager said there was strong demand for international equities, but little in the way of active strategies to fill that need for ETF investors.
“There’s still a lot of white space,” Camuso said
Though shops had churned out plans for new active ETFs, there are only 53 active international ETFs available in the US market, 13 of which launched this year, Camuso said. Meanwhile, there are more than 180 active US equity ETFs.
Investors have piled almost $97bn into international ETFs during the first half of 2021, according to Morningstar Direct data. Only US equity ETFs have attracted more, with $169bn.
Investors looking to buy actively managed ETFs are most interested in buying global equity or fixed-income ETFs, according to Brown Brothers Harriman’s 2021 Global ETF Investor Survey.
But unlike in US equities, asset managers can only launch international equities products that disclose their portfolio holdings each day.
Nontransparent strategies are only permitted to invest in US equities or securities that trade on exchanges that are open at the same time as US equities, according to the Securities and Exchange Commission’s conditions. That means international exposure is limited to companies that issue American depository receipts that trade on US exchanges or international ETFs.
None of BNY Mellon’s ETFs shield their holdings.
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