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Portfolio > Mutual Funds

ETF Plans for American Funds, GAMCO Move Forward

By Janet Levaux

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American Funds is poised to jump into the ETF field shortly, as is GAMCO Investors.

American Funds requested permission from the SEC to sell exchange-traded funds in July 2014 and then amended its ETF request in October and again last month.

The SEC said Monday that unless major opposition to the launch appears by Feb. 27, it is likely to approve the move.

According to SEC documents, American Funds – which is owned by the Capital Group (CGHC) – plans to launch fixed-income and equity funds, as well as funds of funds and funds that include shares in foreign companies and non-U.S. bonds.

American Funds has roughly $1.2 trillion in assets. The ETF industry includes some $2 trillion in assets.

Those assets, though, are hotly contested. On Monday, State Street (STT) cut fees on 41 of its products. Its SPDR brand is currently the market’s No. 3 player, behind BlackRock’s iShares and Vanguard. 

In a recent report, Cerulli called American Funds “the poster-child active mutual fund manager” and noted that the fund giant plans to launch active and nontransparent active ETFs using Precidian Investments’ blind-trust structure.

In other news, GAMCO Investors (GBL) said Wednesday that it would launch a group of managed exchange-traded funds in cooperation with a unit of Eaton Vance (EV).

GAMCO, which is led by Mario Gabelli, announced its partnership with Navigate Fund Solutions and plans to launch managed exchange-traded funds under the NextShares brand. It will file an application with the SEC to sell the ETFs, which were approved by the SEC under Eaton Vance’s management in December.

“GAMCO elected not to participate in the growth in ETFs as our bottom-up research effort has been in part focused on securities in the microcap, small-cap and mid-cap sectors of the market,” the company said in a press release.

“As stock pickers, we are now pleased to participate in the exchange-traded product marketplace through NextShares exchange-traded managed funds, which are designed to protect the confidentiality of portfolio trading information,” it explained.

GAMCO went into the hedge fund business in early 1985 and the mutual fund field with the rollout of the Gabelli Asset Fund in March 1986. “We then entered the closed-end fund world with the Gabelli Equity Trust in August 1986,” said Gabelli, who is chairman and CEO of GAMCO, in a statement.

As is the case with active mutual funds, portfolio managers aim for NextShares ETFs to outperform their benchmark indexes and peer funds “based on their manager’s investment insights and research judgments.”

However, unlike actively managed ETFs, GAMCO said, “NextShares offer the potential benefits of protecting the confidentiality of fund trading information yet providing trading cost transparency to fund investors.”

GAMCO had some $47 billion in assets under management as of Sept. 30, while Eaton Vance had $296 billion of AUM as of Dec. 31.

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