The funds will be asset allocation ETFs, with underlying ETFs that will be allocated as the manager sees fit--effectively active management of a suite of ETFs. The ETFs will be managed by AdvisorShares, a startup launched by Noah Hamman, a former executive at Rydex Investments.
The filing is for two ETFs, the Sector Allocation Fund and Country Allocation Fund. The funds will be managed by a subadvisor, though neither subadvisors nor fees are listed in the filing.
The filing is not the first public registration for an actively managed ETF. Bear Stearns was among the first, filing for an actively managed fixed-income fund in March (www.fundaction.com, 3/20). What makes the AdvisorShares filing stand out among such filings is that the active management involves buying and selling other ETFs rather than the underlying stocks. This diminishes the problem of front-running, which is a concern for other firms looking to launch actively managed ETFs but reluctant to reveal their stock purchases in real time.
Hamman, who was at Rydex from 2001-2005 and helped launch that firm's ETF line, declined to comment on the funds, citing SEC filing rules. But he did say that the concept could be applied to a wide range of offerings, including international/global and currency. It could even be used for relatively narrow offerings, such as a Japan Allocation Fund, which for instance could use the three Japan ETFs from WisdomTree Investments together with Barclays Global Investors' iShares MSCI Japan Index Fund. "You can have a broad number of investment strategies that use a broad number of ETF managers," said Hamman. Each ETF would use ETFs that are already on the market.
Hamman said that while he did not have exact figures, he would be hiring to fill out the AdvisorShares team in the coming months. He said he hoped to have about 15 staffers by the end of the year, mostly on the marketing and distribution side. A portfolio manager who would work with the subadvisors, in what Hamman called a traditional mutual fund-based advisor-subadvisor relationship, will also be hired.
The AdvisorShares filing is the second recent application for an actively managed ETF. On Dec. 14, Grail Partners filed for the Grail U.S. Value Fund, an actively managed ETF that would reveal its holdings before the start of each day's trading. The Fund's portfolio holdings may be changed once a day. While the filing does not name the fund's subadvisor or fees, it states that the ETF will be managed using a quantitative approach. Grail is an investor in ETF firm XShares Advisors.
More stories from Fund Action
--Sam Mamudi