Products June 9, 2009

Firm Launches Four New ETFs

Grail Advisors has announced the registration of four new actively-managed exchange-traded funds (ETFs).
Reported by

The new offerings—RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF, and RP Financials ETF—represent what a press release described as “the industry’s first traditional actively-managed ETFs using a single-manager approach.”

Trading for shares the new ETFs is expected to begin September 1 on the NYSE Arca, Inc.

According to the announcement, the single-manager RiverPark funds will be designed to combine “all the benefits of an ETF structure—lower costs, tax efficiency, transparency of holdings, and intra-day trading—with actively-managed strategies from a veteran asset management team.’

Supporting Roles

New York-based RiverPark Advisors, LLC (RiverPark) will serve as the primary sub-adviser for each of the funds. Wedgewood Partners, Inc., of St. Louis will also serve as sub-adviser to the RP Focused Large Cap Growth ETF. RiverPark will provide day-to-day portfolio management services to RP Growth ETF, RP Technology ETF, and RP Financials ETF, and, in conjunction with Grail, oversee the day-to-day portfolio management services provided by Wedgewood to RP Focused Large Cap Growth.

According to the announcement, Grail unveiled the market’s first “true, actively-managed equity ETF’ last month—the Grail American Beacon Large Cap Value ETF—and says it will follow up this summer with the Grail American Beacon International Equity ETF, the first international ETF of its kind. Those funds were designed to incorporate the traditional investment management approach and a multi-manager format into an active ETF structure, according to the firm.

Other Information

RiverPark was founded in 2006 by Morty Schaja, who serves as the firm’s Chief Executive Officer, and Mitchell Rubin, who is the Chief Investment Officer. All of RiverPark’s principals, including Schaja, Rubin, and portfolio manager Conrad van Tienhoven, came to the firm from Baron Funds. RiverPark has assembled a group of outside advisers to support the senior team in the management of the funds.

David A. Rolfe, will be the portfolio manager of RP Focused Large Cap Growth ETF. Rolfe is the Chief Investment Officer of Wedgewood, and together with Anthony L. Guerrerio, the firm’s CEO and founder, has worked on various large-cap growth strategies for the firm since its inception in 1992, according to the announcement.

Each of the funds’ managers will have the discretion on a daily basis to choose securities for the ETF’s portfolio consistent with the ETF’s investment objective. All four of the funds’ holdings will be fully disclosed on a daily basis.

The new funds will represent the latest in what is anticipated to be a series of offerings of the Grail Advisors ETF Trust. In the press release, Thomas said Grail Advisors is currently in discussions with a number of leading financial institutions and asset managers and expects to launch more customized, actively-managed ETFs this year.

The Markets June 9, 2009

Separate Accounts Saw Equity Rebound in Q1

Investors showed continued confidence in U.S. stock separate accounts and collective trusts in the first quarter of 2009, according to Morningstar.
Reported by

The fourth quarter’s $70 billion outflow from international stock and U.S. stock assets classes reversed in the first three months of 2009, with $67 billion of positive net flows, according to an analysis by Morningstar.

The category that received the most inflows ($27 billion) during the first quarter was large blend. Large blend saw 40% of the inflows into U.S. equities.

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Large growth gained $23 billion and large value gained $14 billion. Morningstar said this indicates that investors’ demand for domestic stocks has remained steady, but investors might possibly be reacting to the perceived “safety” that large-cap stocks have to offer.

Investors pulled about $5 billion out of the small blend category, largely accounted for by T. Rowe Price losing $2.4 billion of assets from its Small-Cap Value II (separate account) Strategy, according to Morningstar.

The largest outflows came from the taxable bond asset class, which lost $73 billion in the first three months of 2009 as a follow-up to the fourth quarter’s record $212 billion in outflows. The intermediate-term bond category lost $39 billion—over half of the taxable bond asset class’s net outflow.

Long-term bond products accounted for another $19 billion of the total outflow. Morningstar cited possible explanations for taxable bond products experiencing outflows, indluding the slight narrowing of credit spreads, the realization that domestic interest rates don’t have much room to fall further, anemic cash flows in the corporate sector, and a March equity rally.

Appetite for international exposure lessened, as investors fled because of recent performance. The International Stock broad asset class lost $6 billion during first quarter of 2009, with the Foreign Large Value category losing $10 billion in outflows. Some international categories did see positive inflows, such as Foreign Large Blend with $4 billion.

Janus Capital Management gained the most ($32 billion) in separate account and CIT assets. Other money management firms with big gains in unregistered vehicles included Prudential Retirement and PIMCO with $17 billion and $15 billion, respectively, according to Morningstar.

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