AMP Capital and BetaShares have formed an alliance to launch a range of active ETFs. This follows the success of the launch late last year of Magellan’s global active ETF and, according to BetaShares, marks the new generation of exchange-traded products (ETPs).
AMP Capital and BetaShares will launch the first three ETPs under their alliance on the ASX over the next few months. They are: the AMP Capital Dynamic Markets Fund, the AMP Capital Global Property Securities Fund and the AMP Capital Global Infrastructure Securities Fund.
The ETPs will replicate the investment strategies of existing AMP Capital funds of the same name and will be actively managed by AMP Capital. For instance, the ‘Dynamic Markets’ fund is overseen by AMP’s well-known economist and head of asset allocation, Shane Oliver.
Unlike the ASX mFund market, which has served to widen investor interest in new forms of easily accessed investment vehicles without having been particularly successful in its own right, the new-style ETPs can be bought and sold during the trading day like a stock. In the mFund market, applications and redemptions take place only at the end of each day.
Alex Vynokur, BetaShares managing director, said the deal with AMP was a natural step in the evolution of the Australian market for exchange-traded products. It brought together the expertise of the two groups to deliver a new set of investment solutions.
“Our research indicates a significant opportunity for active exchange-traded managed funds in Australia,” he said. “The recently released BetaShares/Investment Trends ETF Report found that 61 per cent of financial planners are interested in using these funds as part of their investment process.”
Under ASX rules, so-called ‘active ETFs’ are not allowed to be called that. An ‘ETF’ has to track an index. When Magellan developed its product, after nearly two years of negotiations with both ASX and ASIC, it had to become its own market maker and agree to a limited amount of transparency in the underlying securities. With active ETPs the manager needs to disclose its holdings only monthly or quarterly, so the value of its IP is not lost through continuous disclosure.
Ilan Israelstam, BetaShares head of strategy and marketing, describes the active ETP market, where there is not daily transparency, as “ETFs 3.0”. ‘ETFs 1.0’ were plain-vanilla cap-weighted listed indices. ‘ETFs 2.0’ were the tilted or smart-beta rules-based strategies. And ‘ETFs 3.0’ takes advantage of traditional active management skills, packaged in a format which is more acceptable to a lot of retail investors because of access and liquidity.
* Greg Bright is publisher of Investor Strategy News (Australia)