Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
… as Capital ventures into BlackRock’s ETF territory
Former BlackRock executive Holly Framsted is to become head of ETFs for Capital Group in the US, which plans to launch a slate of both equity and fixed income actively managed listed funds in 2022.
Capital, which has about US$2 trillion (A$2.6 trillion) under management, will be adding the ETFs to about 40 mutual funds which it manages through subsidiary American Funds Distributors.
Framsted, who had been at BlackRock for more than 15 years and who previously served as head of US product segments in BlackRock’s ETF and index investments group, will join Capital in March.
Tim Armour, chairman and chief executive of Capital Group, said in a statement last week (January 14): “Adding ETFs to our suite of solutions will help us meet the needs of a large and growing group of investors who want the benefits of an ETF vehicle.”
According to a Bloomberg report, details of the exact strategies and formats of the products have not yet been disclosed. Capital has also licensed a non-transparent ETF structure from Precidian Investments, Bloomberg says.
The firm is the latest in a line of big money managers making a late entry into the US$5.6 trillion ETF market. The introduction of rules in 2019 in the US that streamlined the approval process for new funds and allowed a structure that shields strategies seems to have prompted many to take the plunge.
The US ETF market overall took in more than $480 billion in 2020, while mutual funds lost a similar amount due to outflows, Bloomberg reports.
Matt O’Connor, chairman and chief executive of American Funds, said: “With Holly’s leadership, we will be ready in early 2022 to deliver active ETFs that seek to provide the same superior long-term results to our distribution partners and their clients that they have come to expect.”
A spokesperson for the Australian arm of Capital said there were currently no plans to enter the local ETF market.
