More active money managers are looking to launch exchange-traded funds as institutional investors' appetite for the funds continues to grow.
T. Rowe Price Group Inc., Legg Mason Inc., Principal Global Investors and Goldman Sachs Asset Management all have filed with the U.S. Securities and Exchange Commission to offer ETFs, both passive and active.
Other firms, such as New York Life Investment Management LLC and Janus Capital Group Inc., have recently acquired ETF shops to enter that arena.
Moving in a slightly different direction, Navigate Fund Solutions LLC, a subsidiary of money manager Eaton Vance Corp., is offering active non-transparent ETFs, called exchange-traded managed funds. The SEC granted Eaton Vance permission to offer ETMFs in November. To date, Eaton Vance's ETMFs are the first - and only - active non-transparent exchange-traded products that the SEC has approved.
“ETF usage overall is definitely being driven in large part by institutions,” said Justin R. White, a partner with money manager consultant Casey, Quirk & Associates LLC, Darien, Conn. “Many are using them to gain exposure in places they haven't been exposed to before.”
Mr. White noted institutional investors appreciate ETFs' “ability to quickly access exposure to an index or commodity that's not easily investible.”
The new entrants have some catching up to do. Data from ETF.com show that as of Aug. 17, the top three ETF providers — BlackRock Inc., Vanguard Group Inc. and State Street Global Advisors — account for 66% of the market, with a combined total of $1.71 trillion in ETFs.
A recent Pensions & Investments survey showed that 34% of officials at defined benefit plans, foundations and endowments say they use ETFs or exchange-traded notes. Of those, 25% said they plan to increase their usage.
About 14% of non-users surveyed said it's “somewhat likely” they would begin to invest via ETFs or ETNs within the next year.
Another report, released by PricewaterhouseCoopers in January, found the total ETF market is predicted to grow 6% per year, hitting $5 trillion by 2020 from the current $2.6 trillion.