BNY Mellon, one of the world's largest ETF servicers, says exchange-traded funds based on derivatives and alternative strategies were the most popular type of ETF products launched in the first nine months of 2015. These "liquid alt" ETFs accounted for 25% of all new funds serviced by BNY Mellon, matching their share from 2014.
Steve Cook, a structured product services executive at BNY Mellon, attributes the popularity of alternative ETFs to two things:
- Registered investment advisors (RIAs) are seeking out downside protection; and
- Investors are anticipating higher interest rates and looking for alternatives to traditional fixed-income.
Smart-beta ETFs accounted for half of the 16 alternative funds launched through BNY Mellon in nine months ending September 30. Traditional fixed-income, by contrast, accounted for only four launches.
Actively managed ETFs saw fewer launches in 2015 than the prior year. "We attribute the lower level of actively managed launches in 2015 to pending regulatory rulings on this segment of the ETF market," said Mr. Cook in a recent statement. "Many firms with these active offerings in the pipeline are awaiting the outcomes on these rulings before moving ahead. We expect a significant upswing in actively managed ETF launches once the new regulations become clear."
Mr. Cook spoke at the fourth BNY Mellon ETF Symposium, which was held October 20-22 in Dana Point, California. The aim of the event was to bring together RIAs, institutional investors, and investment professionals for a "dynamic forum" on ETFs.
"The BNY Mellon ETF Symposium continues to attract registered investment advisors and other financial professionals who depend on ETFs as part of their investment strategy," said Frank La Salla, CEO of BNY Mellon's Alternatives Investment Services and Structured Product Services.
Originally published in DailyAlts
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