Good morning and happy Monday.
Should ET have an ETF?
There have been some ETFs in recent memory that added novel investment strategies to the category. Leveraged single-stock ETFs? Those, friends, are yesterday’s news.
Tuttle Capital Management raised the bar earlier this year, when it filed with the SEC for a line of eight AI-themed ETFs, including one focused on companies “that the adviser believes have potential exposure to advanced or ‘reverse-engineered’ alien technology, spurred by government disclosures about UFOs, and alleged advanced technologies.” So reads the pending ETF’s prospectus.
Another, highlighted by The Financial Times last week, is the Canary Pengu ETF. What is Pengu, one may ask? Not only is it the official token on the Pudgy Penguins project, but it is also the primary investment of that proposed ETF. The fund would also allocate to Pudgy Penguins NFTs, Solana, and Ethereum. The issuer identifies risk factors including advances in computing — such as quantum computing — that could pose a threat to cryptography. No mention of killer whales or leopard seals, but those predators don’t appear to have their own NFT projects … yet.
Asset Managers Aren’t Playing the Dual Share Class Waiting Game
As Tom Petty sang, “the waiting is the hardest part.” For The Kinks it was, “So tired, tired of waiting. Tired of waiting for you.” Lou Reed, Cyndi Lauper, and Fugazi have also tackled the subject. Nobody particularly likes waiting.
For asset managers waiting for the Securities and Exchange Commission to approve dual share classes, that sentiment seems to apply. Even as the regulator is poised to act, numerous companies have converted mutual funds to ETFs. One of the biggest conversions, announced last week, is turning some heads: Akre Capital Management said its sole mutual fund, the $12 billion Akre Focus Fund, will switch to an ETF this fall, pending shareholder approval. The change will result in more tax efficiency, higher transparency, and lower fees, the company said.
The proposed conversion “is the best route forward for our shareholders,” John O’Bannon, director of the company’s institutional fund distribution, said in the announcement.
Can’t Hardly Wait
Last month, JPMorgan disclosed that its $1.2 billion Unconstrained Debt Fund would convert to an ETF, with assets moving in September to the JPMorgan Flexible Debt ETF, the new product. Another firm, Lazard, which added its first ETFs this year and is currently prepping more, converted its International Equity Advantage mutual fund to the Lazard International Dynamic Equity ETF last month. The company is also converting its US Systematic Small Cap Equity Portfolio to an ETF later this year.
Some of the other recent ETF conversions:
- Franklin Templeton announced plans last month to convert 10 municipal bond mutual funds from the Putnam Investments product line it acquired in 2024. Those funds would become ETFs in the fourth quarter of 2025 or first quarter of 2026.
- Thrivent similarly disclosed its intentions in May to switch its $330 million Core Small Cap Value and $27 million Mid Cap Value funds to ETFs in the fourth quarter of 2025.
Waiting Room: Waiting for the SEC’s approval of dual share classes might not be a great strategy for all firms, particularly if they don’t already have a strong line of ETFs but have been planning for a while to break into that space. And even with the advent of dual share classes, adding a mutual fund or ETF share class may not be easy for all issuers and their distribution partners, as fund investors must have brokerage accounts that allow them to receive shares of whatever vehicle a company moves to. “There are technology changes that have to occur at the asset manager side and the broker-dealer side to facilitate the ETF share class,” said Craig Kilgallen, relationship manager at Fuse Research Network. “The broker-dealers need to decide if this is the right way to go. It could create fiduciary issues if someone is in the fund and not the ETF.”
How Active Bond ETFs Beat Passive 89% Of The Time
Bond ETF investors may be losing out. Many are in core bond funds that track an index capturing just 19% of the global fixed income market1. As a result, a large number of passive investors are leaving more than 80% of the market untouched.
Allspring’s actively managed ETFs — AFIX and APLU — expand the playing field, covering more of the worldwide bond market in active pursuit of opportunities. Further, Allspring’s experienced portfolio managers seek to identify mispriced bonds, manage evolving credit risks, and have the capacity to leverage flexibility in fast moving and volatile markets.
Since 2008, active strategies in Morningstar’s Intermediate Core-Plus Bond category have outperformed their benchmark 89% of the time2 in rolling five-year periods — a track record that highlights the advantage of skilled, flexible, active management compared to index-based approaches.
With decades of active investment experience, Allspring blends its deep expertise with the transparency, liquidity, and cost and tax efficiency inherent in ETFs.
Explore Allspring’s Active Bond ETFs.*
*Carefully consider a fund’s investment objectives, risks, charges, and expenses before investing. For a current prospectus and, if available, a summary prospectus, containing this and other information, visit allspringglobal.com. Read it carefully before investing.
Investing involves risk, including the possible loss of principal. Allspring ETF Funds are not available for distribution outside of the United States. Allspring Funds Distributor, LLC (Member FINRA/SIPC).
Proxy Warfare
It’s tough being a proxy advisor: One minute, they’re providing shareholder voting recommendations, and the next, they’re being accused of operating a cartel.
The big proxy advisory firms — Institutional Shareholder Services and Glass Lewis — have come under fire from Congress, lobbying groups, and JPMorgan CEO Jamie Dimon. The Securities and Exchange Commission may also be considering ways to limit their power and influence. Just over a month ago, the House Subcommittee on Capital Markets held a hearing entitled: “Exposing the Proxy Advisory Cartel: How ISS & Glass Lewis Influence Markets.” Such firms, which provide consulting services to public companies, are widely used by mutual fund and exchange traded fund managers to provide proxy voting recommendations for investors. But Dimon, who has long been critical of the big proxy advisors, reportedly called them a “cancer,” according to Pensions & Investments. And there are at least six proposed bills in the House aimed at limiting proxy advisors’ power.