Eagle Capital Management on Monday launched its first exchange-traded fund (ETF) by converting a separately managed account (SMA) into a public fund with $1.8 billion in assets.
Conversions of mutual funds into ETFs have become increasingly popular, but only a handful of SMAs have turned into ETFs, and Eagle's new product is by far the largest, said Todd Sohn, ETF analyst at Strategas.
"I've seen conversions of a few million dollars, to perhaps $100 million or $200 million, but to see a "b," as in billion, attached to the number is a really interesting signal," said Sohn.
The new Eagle Capital Select Equity ETF will build an actively managed portfolio of quality stocks that the management team believes are overlooked by the market and in which it has a high level of conviction. The ETF will levy a 0.80% management fee, toward the high end of the range for actively managed ETFs.
Eagle used the services of Goldman Sachs' ETF Accelerator platform in converting the SMA to an ETF. The Goldman Sachs group has assisted issuers with five ETF launches so far.
Sohn said he expects a growing number of conversions, both from mutual funds and SMAs, into ETFs in the coming months and years.
"Now that actively managed ETFs are established, the next step is to offer new strategies in that wrapper," he said. Moreover, he said, issuers will include not only asset management companies like Eagle but financial advisory firms eager to appeal to younger clients by offering their own branded ETFs.
