Huntington's mutual fund/ETF conversion could create 'whole new industry'

Huntington Asset Advisors Inc. expects to be able to convert one of its mutual funds into an actively managed exchange-traded fund by the summer, making it the first firm to do so. But industry watchers said other firms may follow suit. On June 17, Huntington Asset Advisors, the investment arm of Huntington Bancshares Inc., filed a request with the Securities and Exchange Commission to launch two actively managed ETFs. The pair are the Huntington Ecological Strategy Fund, which will follow environmental themes, and the Huntington Rotating Strategy Fund, an ETF version of its Huntington Rotating Markets Fund Ticker:(HRIAX). The fund seeks to shift holdings among various equity market segments where the firm sees fit. Once the rotating-markets ETF is up and running, Huntington plans to fold in the existing mutual fund that follows the same strategy, said Randy Bateman, Huntington's president and chief investment officer. Huntington this week received word that the firm's order for exemptive relief is making its way through the SEC, Mr. Bateman said. “We are looking at a second quarter or thereabouts in terms of making the conversion,” he said. Although a number of firms, such as Eaton Vance Investment Managers, The Dreyfus Corp. and T. Rowe Price Group Inc., have filed to launch actively managed ETFs, Huntington would be the first to convert an existing mutual fund into an exchange traded fund. Assuming that Huntington gets approval, it is only a matter of time before others follow in its footsteps, said Scott Burns, an analyst at Morningstar Inc. “If we have a successful conversion [of a mutual fund into an ETF], it will inspire others to do it and will speed up the asset gathering for active ETFs overall,” he said. As of Jan 5, there were 26 actively managed ETFs with a total of $1.85 billion in assets, according to Morningstar. OppenheimerFunds Inc. chief executive William Glavin has spoken publicly about his interest in doing a conversion. Both Mr. Burns and Mr. Bateman said that they have received “several” calls from other asset managers interested in doing conversions, but neither would identify companies. “This may help create a whole new industry,” Mr. Bates said.