Yesterday, traditional active manager Gabelli Funds rolled out its first ETF. The actively managed Gabelli Love Our Planet & People ETF (LOPP) combines a value approach with social screens and what Gabelli describes as “holistic ESG analysis.”
LOPP comes with an expense ratio of 0.90%, but that has been waived for the first year of operation, unless the fund accumulates more than $100 million in assets. Even then, the 0.90% in fees will only be charged on the assets above $100 million. LOPP lists on the NYSE Arca.
The fund uses the Active Shares model offered by Precidian and does not disclose its holdings publicly on a daily basis, unlike most ETFs. The prospectus says that disclosures of holdings can be made monthly or quarterly, with a lag of up to 60 days.
LOPP focuses mainly on social issues, looking to companies that have implemented programs and policies to address those problems. It also excludes fossil fuel companies; the largest aerospace and defense contractors; and companies generating significant revenues from tobacco, alcohol, gaming and defense/weapons production.
It relies on in-house research and third-party data from providers like MSCI. After narrowing its investment universe of acceptable companies, the fund’s managers select securities based on whether or not they seem to be undervalued by the market, according to the prospectus.
Marriage Of Active Management & ESG
Gabelli Funds is led by Mario Gabelli, a well-known and highly lauded traditional stock picker. The firm’s entry into the ETF space suggests that so-called nontransparent active management ETF models will attract more traditional active managers to the ETF market. Those managers may have been put off of the space by the fact that transparency is one of the best-known characteristics of the ETF structure.
Interestingly, it is the transparency of ETFs that has made them appealing to ESG investors, as users know exactly what their funds are holding. That said, at least one of the ETFs to launch from American Century uses the nontransparent model offered by the NYSE and has an ESG directive. The American Century Sustainable Equity ETF (ESGA) has been around since last July and currently has $118 million in assets under management.
Contact Heather Bell at [email protected]