Jeremy Grantham’s GMO enters ETF space for the first time

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GMO, the value-oriented home co-founded by the veteran investor Jeremy Grantham, has filed to launch its first trade traded fund, a regulatory submitting exhibits.

The actively managed GMO US High quality ETF will make investments primarily in corporations that GMO believes to be of “top quality”, the submitting says.

The ETF will choose corporations which have a longtime enterprise that may ship a “excessive degree of return” on previous investments and can use money circulation to make investments with the potential for a excessive return on capital or to return money to shareholders by means of dividends, share buybacks or different mechanisms.

Along with investing straight in equities, the ETF may spend money on exchange-traded and over-the-counter derivatives and ETFs, the submitting says.

This text was beforehand revealed by Ignites, a title owned by the FT Group.

The fund might also spend money on the $432mn GMO US Treasury Fund.

The pinnacle of GMO’s centered fairness workforce, Thomas Hancock, together with portfolio managers Ty Cobb and Anthony Hene, will handle the ETF.

That trio manages GMO’s $7.9bn High quality and $76mn High quality Cyclicals mutual funds, Morningstar knowledge exhibits.

The 2 funds bled a mixed $389mn throughout the 12 months ended July 31, in line with knowledge from Morningstar Direct.

Hancock additionally manages GMO’s $1.9bn Assets, $1.1bn Local weather Change, $468mn Useful resource Transition and $72mn Small Cap High quality funds, in line with Morningstar.

These funds recorded mixed internet inflows of $114mn throughout the identical 12 months, pushed largely by the $138mn traders piled into the Local weather Change Fund.

Charges for the ETF weren’t disclosed.

“GMO has all the time been dedicated to providing revolutionary funding options within the constructions that greatest swimsuit our purchasers,” a GMO spokesperson mentioned. “Our extension into trade traded funds is a pure evolution of that dedication, pushed by demand from the middleman and wealth administration area.”

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Lively managers’ persevering with to launch ETFs was “not shocking,” on condition that advisers have been changing into more and more comfy with the ETF construction and continued to extend allocations to it, mentioned Daniil Shapiro, director of product improvement at Cerulli Associates.

“Managers inform Cerulli that their providing of ETF product is usually a case of consumer demand, because it permits for extra tax-efficient exposures than mutual fund product, making having it accessible a should,” Shapiro mentioned. “A key problem at this stage of the market is discovering a distinct segment for a product, and whereas this typically sends upstart corporations within the mistaken route, typically by way of overly focused exposures, there may be loads of room for trusted managers providing energetic exposures.”

*Ignites is a information service revealed by FT Specialist for professionals working within the asset administration trade. Trials and subscriptions can be found at ignites.com.