Daily ETF Watch: Principal Group Enters Ring

Principal Financial files for actively managed multi-asset-class fund.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

Principal Financial Group, which first filed an exemptive relief request for ETFs back in March 2013, has put its first ETF into registration, and the firm is clearly looking to surf the wave of investor demand for income-generating investments.

 

The Principal Edge Active Income ETF will invest in equities and fixed income, and will use a tactical asset allocation approach based on economic conditions and indicators to determine how it allocates among asset classes.

 

The fund is basically a “go anywhere” fund, with “current income” listed as its main objective. The fixed-income side of the portfolio has no restrictions of note on the types of fixed-income securities it can invest in, and can include investment-grade and high-yield debt as well as domestic and international issues. The equities portion of the portfolio can include domestic and international stocks, including those from emerging markets, as well as REITs, MLPs and preferred stocks, the prospectus said.

 

The proposed fund will likely be in competition with the First Trust Multi-Asset Diversified Income ETF (MDIV), an income-focused index-based ETF that can invest in a similarly broad roster of asset classes. MDIV has almost $960 million in assets under management and an expense ratio of 0.68 percent. It’s been around for more than two years.

 

With its active focus, the Principal ETF will definitely be able to differentiate itself from MDIV, but the WBI Tactical High Income Shares (WBIH), which made its debut last August, already has nearly $172 million in assets despite its hefty 1.08 percent price tag.

 

The Principal Edge Active Income ETF will be subadvised by Edge Asset Management, a member of the Principal Financial Group. Principal Financial is a financial services group offering investment services and products, and insurance. It has more than $500 billion in assets under management.

 

The proposed fund is slated to list on the NYSE Arca; however, neither a ticker nor an expense ratio was included in the filing.

 

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.