GMO, a value-oriented firm co-founded by legendary investor Jeremy Grantham, plans to offer its first ETF, a filing with the Securities and Exchange Commission showed.
The GMO U.S. Quality ETF, an actively managed fund, will invest primarily in equities of U.S. companies that GMO, the fund's adviser, deems to be of high quality, according to the Aug. 21 filing.
GMO's move into the ETF arena illustrates a continuation of two trends, according to Bryan Armour, director of passive strategies research for North America at Morningstar Research Services, a Morningstar subsidiary.
"No. 1, a lot of the last remaining holdouts of mutual fund companies have capitulated and are adding ETFs," Mr. Armour said, adding that he suspects the decision by such managers to offer ETFs is often in response to requests from clients or intermediaries.
The second trend relates to the increasing popularity of active ETFs, he said.
"We're seeing star managers come in with fully transparent ETFs, so the fear of transparency has gone away," Mr. Armour said, citing BlackRock's Rick Rieder and T. Rowe Price's David Giroux as examples of such managers now at the helm of active ETFs.
Often when traditional mutual fund managers enter the ETF arena, they offer "similar but differentiated strategies to existing mutual funds," he said, adding he suspects that GMO's new ETF, which he emphasized will be a quality strategy rather than a value fund, is likely to be similar to the GMO Quality Fund, a mutual fund that according to GMO's website had $8 billion in assets under management as of July 31.
A spokesman for GMO confirmed that the new fund would be the firm's first ETF.
"GMO has always been committed to offering innovative investment solutions in the structures that best suit our clients," the spokesman said. "Our extension into exchange-traded funds is a natural evolution of that commitment, driven by demand from the intermediary and wealth management space."
GMO had $58.8 billion in total AUM as of June 30, the spokesman said.
