BNP Paribas Australia first to offer actively managed ETFs

In what it is claiming is a world first, BNP Paribas Asset Management was given the go ahead by the Australian Securities and Investments Commission on Thursday to offer a range of actively managed exchange-traded funds (ETFs). The four ETFs will feed into four existing institutional funds managed by BNP Paribas.

“As far as we know, there is nothing like this offered on any other exchange,” says Robert Harrison, executive director of BNP Paribas in Sydney. “There are several index-linked ETFs in the US and a few closed-end actively managed funds, but none that is an open-ended fund that can be purchased at NAV at any time. For these funds the prospectus remains open and will be updated every 12 months.”

Harrison says this will give retail investors access to better returns than those offered by index-linked funds. The firm’s Australian Equities fund, for example, has outperformed the All Ordinaries by 6% for the past 12 months. The other three funds to be offered in the line-up are an Australian smaller companies fund, the MFS Asset Management fund of global equities, and a balanced fund.

“We decided to feed into our established institutional funds because they are already sizeable and there would not be any issue with starting out too small,” explains Harrison. “The other advantage is that we can achieve consistent performance across the portfolio by treating all of our funds in the same way. The investment style and philosophy will be the same applied to our discretionary funds.”

The only other ETFs trading on the ASX to date is an index-linked retail fund launched by SSB Asset Management in February. State Street Global Investors and Merrill Lynch are both expected to announce ETFs in the coming months.

Unlike SSB’s fund, which is offered direct to the retail investor, BNP Paribas will be marketing through a network of financial advisers and financial planners.

“The fees applying to these funds are identical to the standard retail fee structure,” says Harrison, explaining that there will be no benefits to investors on the fee side. “However, the exchange-traded structure does offer investors a higher level of liquidity from the listing on the exchange and greater level of exactness when redeeming their monies.” Instead of waiting the usual 10 days to receive their redemption cheques, investors will receive their funds in three days. “This transfer will be made even quicker when the exchange moves to T+1 settlement.”

BNP Paribas begins roadshowing the funds this week and will start taking subscriptions from April 27.