Putnam to expand suite with its first fully transparent active ETFs
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Putnam Investments plans to add its first fully transparent exchange traded funds to its existing ETF offering.
The manager plans to launch the Putnam BDC Income ETF, Putnam BioRevolution ETF and Putnam Emerging Markets ex-China ETF, according to filings. The products will join four other ETFs that it launched nearly a year ago: the $26mn Putnam Focused Large Cap Value ETF, $8mn Putnam Focused Large Cap Growth ETF, $7mn Putnam Sustainable Future ETF and $6mn Putnam Sustainable Leaders ETF.
The initial four ETFs are semi-transparent strategies that use Fidelity’s patented methodology and mimic strategies run in other investment vehicles. But the newest offerings will differ. They will disclose their portfolio holdings daily and are strategies that are brand new to Putnam, the regulatory filings show.
The products are designed to give investors “exposure to important developing areas”, Carlo Forcione, Putnam’s head of product and strategy, said in a press release. The ETFs will extend Putnam’s equity investment capabilities based on the “traditional fundamental research” that the firm uses in various retail investment wrappers, he added.
The filings do not give a specific date for the ETFs’ launch, nor do they list fees. A Putnam spokesperson declined to comment on the recently registered products.
Its newest crop of strategies appears to focus on growing areas of the retail investment landscape.
The BDC ETF, for example, will invest in business development companies, a type of closed-end fund that invests most of its assets in small to midsize or distressed companies, the filing shows. BDCs appeal to certain investors because of their regular dividend payouts and the access they provide to private investments through a retail wrapper.
Several big asset managers have begun running BDCs, including Franklin Templeton through its acquisition of Benefit Street Partners, as well as BlackRock and Nuveen. Pimco and Fidelity have both filed to launch such products.
The proposed fund’s most direct competitor is the $587mn VanEck BDC Income ETF, which brought in $106mn in net sales during the first four months of this year, according to Morningstar Direct. Invesco’s $200mn Global Listed Private Equity ETF and WisdomTree’s $6mn Alternative Income Fund, meanwhile, track indices that include significant allocations to BDCs, regulatory filings show.
Putnam’s forthcoming BioRevolution ETF, meanwhile, would tap into investor demand for thematic ETFs. The ETF will be focused on companies that provide the materials, equipment or services for advancements in biological sciences, according to the preliminary prospectus.
ETFs that Morningstar classifies under the “life sciences” theme held about $13.1bn at the end of the first quarter, down from a peak of $20.1bn on March 31 2021, the researcher’s database shows. Such ETFs had recorded net outflows in each of the last four quarters, including $547mn in the first quarter of 2022.
The proposed Emerging Markets ex-China ETF will focus on developing markets but will exclude companies based in China or Hong Kong, according to the preliminary prospectus. Brian Freiwald, the named manager, also manages Putnam’s $439mn Emerging Markets Equity Fund.
The actively managed emerging markets fund will use the MSCI Emerging Markets ex-China Index to select its portfolio holdings, the filing shows. Two passive ETFs track the same index: the $2.4bn iShares MSCI Emerging Markets ex-China ETF and the $29mn KraneShares Emerging Markets ex-China ETF.
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