Man Group goes all-in on ETFs with hedge-fund trades for masses

The world’s largest publicly listed hedge fund is breaking ranks with tradition — and stepping into the ETF arena under its own name.

On Thursday, Man Group Plc is launching two actively-managed bond ETFs — the Man Active High Yield ETF (ticker MHY) and the Man Active Income ETF (MANI). Hedge funds have dipped their toes into ETFs via so-called sub-advisory deals but Man is going full tilt. In a first for the firm, Man will be sole adviser and operator, housing the funds in its own trust. That allows for full control over distribution, branding and portfolio construction.

It’s a bet on the future of active ETFs and a symbolic move for the hedge fund community, which has long resisted the transparency and daily liquidity that come with typically low-fee ETF offerings. 

“Look at this as Man being all-in in the ETF business versus just us dipping our toes,” said Michael Barrer, Man’s head of ETF capital markets. “This is early innings in the ETF space for managers like Man.”

Man’s new funds are set to have similar characteristics of two existing offerings the firm already manages, one focused on high yield, the other on diversified income. The funds have delivered annualized returns of about 9% and 22%, respectively, based on documents from the firm’s website.

The strategies won’t be cheap, going by ETF standards. MHY — at 0.69% — will be among the priciest ones in its category, according to data compiled by Bloomberg Intelligence. But London-listed Man is betting its track-record will attract clients. 

“If they can differentiate from the crowd and outperform products already there, they might gain market share,” said Mohit Bajaj, director of ETFs at WallachBeth Capital. “Man manages a lot of money. Maybe they will market to their existing client base first and get them to invest, especially those loyal to their brand.”

As of June 30, Man managed $193 billion in assets, around 30% of which are domiciled in the US.

The timing is strategic. Active ETF assets have multiplied nearly six-fold since 2020, BI data show. New issuers are launching at a record pace this year, amid regulatory easing and surging demand for fixed-income products. BlackRock Inc., the world’s largest asset manager, expects bond ETFs alone to hit $6 trillion by 2030.

MHY invests primarily in junk bonds. MANI tracks debt instruments across multiple credit grades and market sectors with a fee that stands at 0.85%. 

Other hedge funds have made inroads into the $12.5 trillion ETF universe in the US. Bridgewater Associates LP’s “All Weather” strategy this year was packaged into an ETF managed by State Street Investment Management. DoubleLine Capital LP has a slew of ETF offerings from commercial real estate to asset-backed securities. Pershing Square Holdings Ltd and Baron Capital are among others aiming to join the rush.

ETF launches built around elite investment brands haven’t always caught fire. The SPDR Bridgewater All Weather ETF (ALLW) has trailed its benchmark since a March debut, while pulling in nearly $400 million. PRIV, a credit ETF initially tied to Apollo Global Management Inc.’s name, had the branding changed after regulatory scrutiny.

At Man, the hedge fund has been undergoing an overhaul since its Chief Executive Officer Robyn Grew took charge in September 2023. A part of that is deepening its push into the US. Currently, it has dedicated a staff of 17 to US wealth.

“We are an active manager. We want to bring what we consider one of our strongest capabilities to markets,” said Mark Bedford, Man’s global head of wealth, who was appointed last year. “The way we will be known here is doing what we do best, which is delivering true outperformance.”