Active ETFs offer firms channel to distribute strategies

Active ETFs provide effective distribution opportunities for financial asset management firms around the world that are seeking to bring their strategies to the US markets, AdvisorShares Investments says.

Greg Webster, CEO of Fund.com, the parent company of AdvisorShares Investments, says a range of European and South American companies have expressed interest in bringing their strategies to the US market, wrapped up in an active ETF solution.

He says: "If asset managers are considering bringing a brand and strategy through to the mass market, active ETFs can be a very effective structure with good distribution potential."

For example, AdvisorShares has recently launched the Mars Hill Partners Global Relative Value Active ETF, a hedge fund-like strategy designed to generate alpha in a rising or falling market.

He says: "Various hedge funds are re-evaluating their business model, with them experiencing redemptions and liquidity issues; they are considering bringing their strategies through an active ETF solution."

He adds: "We are agnostic to the many advisors that are considering AdvisorShares as an active ETF platform solution. We are looking to make ourselves a competitive solution for managers to bring their products to market. We can do this quickly - we lead the drafting of the Securities and Exchange registration statement and commence the process of launching a product that can take as little time as 120 days."

Active ETFs offer benefits over the traditional 1940 Act mutual fund, says Webster. "Traditional 1940 Act funds strike the Net Asset Value (NAV) at the 4pm close of the market, and provide no intra-day liquidity, delayed transparency of the fund's holdings and are less tax efficient for the shareholders."

Conversely, he says active ETFs have greater tax efficiency for shareholders, provide intra-day liquidity and greater transparency of the holdings, even if there is a day's lag.

He adds: "This is an early stage effort to bring active ETFs to market. There's approximately $9trn in traditional 1940 Act mutual funds. Over time we anticipate a shift from these investments towards active ETFs, with the benefits of intra-day liquidity and transparency."