Mutual Fund Firm Hotchkis & Wiley Files for its First ETF

Hotchkis & Wiley, a 45-year-old asset value manager, is the latest mutual fund shop to dip a toe into the fast-growing ETF space.

According to a filing with the Securities and Exchange Commission, the Los Angeles-based asset manager is planning a new small-and-midcap value strategy for its first step into exchange-traded funds.

The H&W SMID Cap Diversified Value Fund, which does not yet have a ticker symbol, will be an actively managed strategy that follows the firm’s long history of value investing.

According to the filing, “under normal circumstances, the fund will invest at least 80% of its assets in equity securities of small to mid-capitalization companies” that Hotchkis & Wiley Capital Management deems undervalued.

The fund’s market capitalization range will be between $8 million and $48 billion.

Another Mutual Fund Shop Shifts Focus to ETFs

While the new ETF is not specifically marketed as ESG, the portfolio management will include specific environmental, social and governance factors when managing the 150 to 200 stocks in the portfolio.

“As part of the advisor's investment process, the investment team evaluates the general and industry-specific environmental, social and governance factors that the advisor believes to be the most financially material to a company's short-, medium-, and long-term enterprise value,” the filing states. “The advisor believes this evaluation contributes to its overall analysis of a company’s value creation for shareholders and future financial performance.”

The ETF will be overseen by Hotchkis & Wiley co-managers Judd Peters and Ryan Thomes.

The firm manages a total of $33 billion across nine mutual funds, with a lineup that includes six U.S. equity value funds, three international equity value funds, and one high-yield fixed income fund.

The company declined to comment while the ETF is awaiting SEC approval, but the new fund is not a clone or a conversion of an existing mutual fund and will be a new strategy for Hotchkis & Wiley.

The migration toward ETFs and away from mutual funds has been a multi-year trend, highlighted in 2024 with a record $1.1 trillion worth of ETF inflows, which compares to $600 billion worth of ETF inflows during each of the previous two years.

Along those same lines, mutual fund conversions to ETFs set a record in 2024 with 55 conversions, which compares to 35 during each of the two prior years.