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Wednesday, May 26, 2021

Reynolds Kicks Off Putnam's ETF Push

Reported by Neil Anderson, Managing Editor

An 84-year-old, active mutual fund firm with $197 billion in AUM (as of April 30) is entering the ETF space with four offerings. Watch for them to expand that lineup.

Robert Lloyd "Bob" Reynolds
Putnam Investments
President, CEO
This morning, the Putnam Investments team's first four ETFs launched on the New York Stock Exchange (NYSE). Bob Reynolds, president and CEO of the Boston-based asset manager, confirms that more Putnam ETFs are in the works.

"We totally plan on offering a family of funds," Reynolds tells MFWire. "We'd love to see it in different asset classes."

Putnam's debut ETFs are: the Putnam Focused Large Cap Growth ETF (PGRO), PMed by Richard Rodzy and Gregory McCullough; the Putnam Focused Large Cap Value ETF (PVAL), PMed by Lauren DeMore and Darren Jaroch; the Putnam Sustainable Future ETF (PFUT), PMed by Katherine Collins and Stephanie Dobson; and the Putnam Sustainable Leaders ETF (PLDR), also PMed by Dobson and Collins. All four are active, translucent (also known as semi-transparent, or ANT, i.e. active non-transparent) ETFs focused on U.S. equities (which is as far as the SEC's blessing currently extends for such non-traditional ETF structures), and they all use Fidelity's take on translucent ETF structures.

"We did a complete search on who was out there. We chose Fidelity as our provider for a lot of reasons," Reynolds says, praising the Boston Behemoth's technology and distribution efforts around active translucent ETFs.

Reynolds notes that Putnam could launch more traditionally structured ETFs, using more quantitative equity strategies, even without further SEC action on translucent ETF structures. And Reynolds hints that other equity ETFs, fixed income ETFs, and multi-asset ETFs could be in Putnam's future, pending the SEC's blessing's expansion for translucent ETF structures. (There's at least one firm pushing to extend active translucent ETFs to long-short strategies.)

"We'd love to see them expand that to other equities," Reynolds says.

Reynolds says that the Putnam team has been involved in the active ETF discussion for years, and he frames the recent debut of translucent ETF structures as critical for a firm like Putnam to enter the space so the team can protect their secret sauce when it comes to investment strategies.

"We're a fundamental shop. We do proprietary research," Reynold says, lauding the Fidelity approach to a translucent ETF structure. "We were impressed with the proxy that they use to represent the portfolio on a daily basis. It provides us a type of protection that we're looking for."

All four initial Putnam ETFs may seem familiar to Putnam watchers.

"We said, rather than invent a strategy, let's do four of our most popular disciplines or strategies that we have ... so that we hit the ground running," Reynolds says. "So many people out there know the managers, know the strategies involved here."

The ETFs aren't clones of existing mutual funds, but they are "very, very similar," Reynolds clarifies, noting that number of holdings and other details will vary. Yet he puts the launch of the ETFs in the context of Putnam's broader goal of letting clients "choose what type of wrapper they want" for strategies; other Putnam wrapper choices include traditional open-end mutual funds, SMAs, and (for strategies used in the DC space) CITs.

"This will be another wrapper on a strategy they know with a manager they know from a firm they know," Reynolds says.

When it comes to active ETF adoption (the bulk of current ETF industry business is in passive funds), he notes that it took many years for even passive ETFs to initially gain traction. Likewise, when it comes to active translucent ETFs today, some distribution partners are taking a "wait and see" approach, while others may be waiting another quarter or two. Yet he notes that there's another opportunity here: investors "who only deal with ETFs."

"We're opening up a whole new group of investors to us," Reynolds says.

Meanwhile, today the Putnam team is kicking off a big digital marketing push around their new ETFs. Reynolds notes that the team has long placed a big emphasis on social media.

"We're unleashing that on this offering!" Reynold says. 

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