Russell Investments introduced the first of many exchange-traded funds this week.
On Thursday, the firm launched the Russell Investment Discipline ETFs, a group of six funds that are designed to complement other ETF strategies. The ETFs, all based on the Russell 1000 Index, are designed to fit financial advisers' special needs and add beta to their client portfolios, said Greg Friedman, Russell's managing director of global product for ETFs.
For example, the Russell Growth at a Reasonable Price ETF Ticker:(GRPC), is for advisers who are looking for stocks with consistent historical earnings growth, rather than stocks with high price-earnings ratios, said Andy Arenberg, managing director of global distribution for ETFs at Russell. Each of the funds costs 37 basis points.
With these ETFs, Russell isn't trying to compete with the likes of
BlackRock Inc. or
The Vanguard Group Inc., which licenses Russell's indexes for its own ETFs.
“We don't want to get into the market-cap-weighted space,” Mr. Friedman said. “We don't want to get into a pricing game.”
But that doesn't mean that Russell doesn't have plans to expand its ETF lineup. In fact, the firm hopes to have 30 to 50 passive and active ETFs out in the market by the end of 2012, Mr. Friedman said.
Russell, whose ETF division is based in San Francisco, bought U.S. One Inc., a registered investment adviser with one actively managed ETF of funds, last year. The firm has filed with the Securities and Exchange Commission to launch three additional active ETFs of ETFs: a bond portfolio, a real-return portfolio and a global-opportunities portfolio.
Russell also is discussing launching active ETFs that address transparency issues, Mr. Friedman said, declining to elaborate.
One of the challenges for fund companies launching active ETFs is managers' concerns about having their portfolios front-run by hedge funds and traders. Russell is talking about ways to address that concern, Mr. Friedman said.
As part of its push into active ETFs, Russell is looking at partnering with third-party managers to run the portfolios.
“There are sectors where Russell doesn't have expertise,” Mr. Friedman said.
Ideally, Russell would like to partner with a manager with a strong brand.
“It makes sense to match up with firms with great portfolio managers who can instantly attract assets,” said James G. Polisson, managing director and chief executive of ETFs at Russell.
