BBH’s Craswell: Active managers face operational nuances with ETF share classes

Active managers also risk cannibalising existing mutual fund assets

Jamie Gordon

Andrew Craswell, European head of ETF services at Brown Brothers Harriman, has said ETF share classes could be a gateway for active fund managers looking to enter ETFs, however, warned new entrants must not be complacent about the operational nuances involved.

In a recent ETF Stream webinar, titled ETF Investigations: Listed and Unlisted Share Classes: A Game Changer?, Craswell noted there are several operational similarities between launching ETF share classes and launching an entire ETF platform.

Despite this, he said many active managers may view the share class structure as a route to market in ETFs without disrupting their core active mutual fund business.

“ETFs are becoming more disruptive to asset management in general and active managers have gone from not taking our meetings to talk about ETFs a few years ago and are now embracing it a lot more and very much more open to discussions.

“A lot of the operational infrastructure needed when building a new ETF platform is the same as launching an ETF share class of an existing mutual fund such as capital markets function, the production of PCFs, reporting around the portfolio and handling of the authorised participant creation-redemption activity.

“Active managers with an existing successful mutual fund they are looking to bring into an ETF need to think about the pricing, what is the expense ratio and whether they risk not treating shareholders in the same way.”

Speakers in this webinar include:

· Andrew Craswell, European head of ETF services at Brown Brothers Harriman

· Marco Montanari, global head of ETF and indexing capability, HSBC Asset Management

· Stephanie Hanrahan, senior associate for asset management and investment funds, Arthur Cox

ETF Investigations is a new webinar series from ETF Stream which examines the key issues facing ETF investors in Europe. To watch a full replay of this webinar, click here.


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