PowerShares To Focus On Distribution, Advisor Ed

 
PowerShares Capital Management is focusing its efforts on distribution, particularly on educating financial advisors. After years of expanding its exchange-traded fund line, the firm believes the future of ETF growth will come from explaining how ETFs can fit in portfolios. "Our [wholesaling] efforts will mirror more [closely] the traditional mutual fund model," said Bruce Bond, president and ceo.

Bond said there are differences between the models because ETF margins are lower. As a result the focus will be on ETFs themselves rather than broader value added offerings. "It's about education and knowledge, helping advisors know the value of ETFs and how they operate and less on generic, holistic themes," said Bond. He added that he thought it would be several years before there is mass knowledge of ETFs among advisors.

The growth of unified managed accounts may help power ETF growth, as advisors will invest in smaller, more niche ETFs as part of a broader UMA. Bond said PowerShares wholesalers are working with UMA sponsors to show how ETFs fit in such portfolios. Bond added that the firm is also targeting institutions, including fund selection units at wirehouses, hedge funds and consultants. "We need more education and visibility on the institutional side," he said.

Bond said that PowerShares will be "fairly aggressive" in the launch of actively managed ETFs. The firm was one of four to receive preliminary approval for an actively managed ETF in early February and its fund was the only equity ETF of the four. It received final approval last week. When asked about who would manage such ETFs, Bond said, "We will rely on our parent [Invesco] to support us in that area."

Being first mover is still an important aspect of the ETF market to Bond. For instance, despite Barclays Global Investors' MSCI EAFE ETF charging more than the Vanguard Group's near-identical ETF, investors are staying in the BGI fund. "They had a good experience and the ETF has done what they wanted, so they're happy and unlikely to move," said Bond.

Bond said that despite recent ETF liquidations, he thought it would be premature to close any of PowerShares' 60-odd ETFs while the space is still growing. "We're going to wait to see the industry mature," he said. --Sam Mamudi 

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