End of August saw the launch of alternatives firm Man Group’s first ETF, using its AHL systematic trading system to launch AHLT – American Beacon AHL Trend ETF – with Resolute Investment Managers’ USD63 billion manager of managers American Beacon Advisors.
Jeff Ringdahl, President and CEO of American Beacon Advisors and Resolute Investment Managers explains that Resolute has USD80 billion under management across four business lines, the most famous of which, in the ETF context, is its distribution function for disruptive innovation firm ARK Investment Management, which was originally available only through ETFs and has now expanded to managed accounts, an interval fund, and other product types.
In addition to Resolute’s ARK relationship, their affiliate American Beacon Advisors has a mutual fund family, and Resolute has majority ownership of four other investment management boutiques, who also serve an institutional audience.
The ETF with Man AHL is American Beacon’s first step into ETFs and driven, Ringdahl says, by client demand.
“We provide sales and marketing support for all our businesses which helps them grow,” Ringdahl says. “So, we are out with the American Beacon Advisors products to intermediaries, RIAs, wealth management firms and financial advisers, helping them to serve their clients’ needs with a variety of solutions including mutual funds, separately managed accounts, collective investment trusts, and now ETFs.
“We are more valuable to them when we can present them with more solutions, more wrappers.”
The Resolute business model is to either wholly or majority own their partner businesses, “so we participate in the bottom line,” Ringdahl says. “We run the organisation as a team first.
“We started building out this multi-affiliate business model in 2016 with ARK and one of our capabilities is identifying and attracting talented investment management firms and wrapping that in a mutual fund, or now an ETF wrapper, so we find our way to a fund sub-adviser relationship.”
The American Beacon Funds are all active funds, focused on long-term alpha generating strategies, many of which have not easily been able to fit into the ETF structure.
“Cathie [Cathie Wood, ARK’s founder and CIO] is a trail blazer and put actively managed ETFs on the radar and others are now comfortable with it,” Ringdahl says. “Money gravitates to the thing that is the most client friendly and investment managers have had to become more comfortable with the structure that has full transparency.”
The firm considered using the semi-transparent model to launch their ETFs but have decided to put funds that need to be non-transparent in the mutual fund format and use ETFs for funds that can be transparent.
The firm has had a long relationship with AHL since 2014 when it launched a managed futures mutual fund, the American Beacon AHL Managed Futures Strategy Fund. The latest ETF product is the firm’s fourth product with the Man Group, which also includes two other mutual funds: American Beacon AHL Multi-Alternatives Fund, which launched in mid-August, and American Beacon AHL TargetRisk Fund, which launched in December 2018.
They are here to stay in the ETF arena. “There will be more filings before the end of the year in this business to grow this product segment,” Ringdahl says. “Clients are gravitating towards the low cost and tax efficiency of the ETF structure – it’s a natural evolution which starts small and grows and expands. It’s been a long-term evolution and the 6c-11 rule was critical, as was the development of technology.
“There has also been tremendous growth in the capital market system which has expanded liquidity which allows funds to launch with limited amounts of capital, so available to smaller and medium sized fund sponsors.”
The firm is evaluating additional partners with which to launch ETFs and is also interested in building indices which allow for exposure or a view on an investment style, beyond active.
