The moves mark a shift in the ETF market, which is largely populated by specialist firms. Only three firms offer lines of mutual funds and ETFs under one brand--Vanguard Group, Rydex Investments and ProFunds, while Fidelity Investments has one ETF. ETF firm PowerShares is now part of AIM Investments after a Sept. 2006 purchase. There are 11 other ETF providers, according to a recent State Street report, none of which provide mutual funds.
The Dreyfus-WisdomTree co-branded ETFs will be in the currency and fixed-income areas. At press time there were no further details. Officials at Dreyfus and WisdomTree did not return calls.
Matt Hougan, editor of IndexUniverse.com, said that while there may be similar deals to the Dreyfus-WisdomTree partnership in future, it will depend on ETF firms developing potential blockbuster ideas to attract mutual fund firms. He said that the WisdomTree ETFs, which will include the first China, South Korea and Brazil currency offerings, are such examples. As a result, the deal will marry what will likely be popular ETFs with an established and large distribution network.
Andy O'Rourke, marketing director at Direxion, said it is looking at ETFs in response to competition from Rydex and ProFunds. "They are our most direct competition and they offer leveraged ETFs as well as leveraged index funds," said O'Rourke. Direxion would use existing leveraged index bull and bear strategies for any ETF launches. O'Rourke said that despite the filing, Direxion has not yet committed to launching ETFs.
Hougan said that Direxion's possible move into ETFs makes sense because asset growth of leveraged index mutual funds has "stopped entirely." Money is instead heading to ETFs because ETFs are better for the main users of leveraged offerings--traders. Hougan added that while Direxion will be third mover behind Rydex and Profunds in the leveraged ETFs space, "the leveraged ETF market is not fully developed."
Tom Carter, managing director at ALPS, said his firm is interested in satellite, rather than core, offerings. The firm is considering offerings in commodities and listed private equity. Carter said that ALPS is in talks with several index providers about forming a partnership, but declined to give names. "We are looking for providers with unique indexes that would fit with the satellite products we are looking to launch," said Carter.
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--Sam Mamudi & Mike Schnitzel