RiverFront is the second- largest ETF strategist in the country today, with some $5.5 billion in assets under management. But the firm has been growing another footprint as well—that of subadvisor to a growing roster of ETFs offered by ALPS and First Trust.
There’ve been eight actively managed ETFs brought to market in recent months, tapping into everything from U.S. to international equity to fixed income. The funds include:
With First Trust:
RiverFront also subadvises the RiverFront Strategic Income Fund (RIGS | B-34), which launched in 2013, and has $324 million in assets.
Rob Glownia, analyst with the Richmond, Virginia-based firm, tells us how RiverFront’s push into launching ETFs jibes with its role as an ETF strategist, and how advisors can benefit from it all.
ETF.com: RiverFront subadvises nine ETFs today through two different issuers. At one point you also considered a lineup with PowerShares. Why work with different providers? Is it to reach a broader audience, or does it have to do with RiverFront's philosophy as a firm?
Rob Glownia: Part of it is based on asset class. We already had a fixed-income product with ALPS that we launched in 2013. And two of the eight funds we've recently launched are fixed-income products, so the natural fit was to continue with ALPS, because we had a standing relationship and a process we could leverage and use.
We also had two U.S. equity funds, and ALPS has this great operational chassis to run these funds, so we, again, partnered with them.
On the other side, we launched four international funds with First Trust. Part of the reason for going with First Trust, in addition to their great reputation, is that there are some complexities with running an international fund. We were impressed with their capabilities, whether it was for currency hedging or fund accounting and the like. It was a natural fit to work with them on those ETFs.
ETF.com: So, for the investor, the easiest way to distinguish between these families of RiverFront ETFs with different providers is by asset class.
ETF.com: They are all actively managed ETFs, and they're all different flavors of strategic-beta or factor-based investing. Is that what sets RiverFront apart?
Glownia: Whether it's for these ETFs or for how we manage our separately managed accounts, our belief is that investing is done best by having a quantitative approach, and a qualitative overlay. We like to have quantitative tools, whether it's using factors or sectors of thematic investing. But the quantitative approach is informed by qualitative judgment.
ETF.com: If you look at actively managed ETFs today, two things stand out. First, there are only some 151 funds out of 1,900-plus ETFs. Secondly, there aren’t that many success stories, and the few we see are often in fixed income. Why choose active ETFs vs. passive?
Glownia: Active is what we've done. Active is something that gives flexibility. Think about Brexit as an example. An index can’t adapt to such a fluid-type scenario as Brexit. We believe active gives us flexibility to adapt and to make inter-month changes, where an index is tied to the rules that don’t allow for tactical changes.
Now, I agree there haven't been a lot of success stories in active. Part of that's because a lot of active managers aren't comfortable with the structure of an ETF, where you have to disclose your holdings daily. They feel like they're giving away their secret sauce by having to disclose what they own.
But since inception, at RiverFront, we've updated all of our holdings daily, and anytime we make a change to the portfolio, we publish a trade rationale for our partner advisors. We are very transparent. We call ourselves the asset manager with glass walls. To put our active strategy into an ETF structure doesn't give us a lot of heartburn.