Fund Firms Moving Into ETFs
A growing number of mutual fund firms are moving into the exchange-traded fund space. Last week Direxion Funds and ALPS Fund Services filed for ETFs, while Dreyfus teamed with WisdomTree Investments to launch an ETF line. Northern Trust filed for a line of international ETFs in November (FA, 11/12).
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.