A $26B-AUM Active Shop Enters the ETF Biz
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Friday, August 28, 2020

A $26B-AUM Active Shop Enters the ETF Biz

An active asset management boutique in the Big Apple is poised to enter the ETF business in a few months.

Daniel "Dan" Cayley Chung
Fred Alger Management
The team at Fred Alger Management, LLC (Alger) is prepping their first pair of ETFs, both active equity funds. The strategies, Alger 25 ETF, and Alger Mid Cap 40 ETF, are expected to launch in Q1 2021.

"Alger has offered leading growth equity strategies for over 55 years, and we continue to see an increase in appetite among investors for focus strategies," Jim Tambone, Alger's executive vice president and chief distribution officer, wrote in a statement to MFWire. "We see an opportunity in the market to expand the diversity of vehicles available to our clients."

Dan Chung, CEO and chief investment officer of Alger, puts the firm's move into the ETF space in the context of Alger's "record of investing in change and innovation."

The Alger 25 ETF will be PM by Ankur Crawford, executive vice president and portfolio manager at Alger, while the Alger Mid Cap 40 ETF will be managed by Amy Zhang, EVP and PM at Alger. Both funds will list on the NYSE Arca, and long-time Alger ally Brown Brothers Harriman (BBH) will serve as the funds' administrator, custodian, and transfer agent.

Alger has also licensed Precidian's ActiveShares "non-transparent" structure for both planned ETFs.

"Running concentrated, focus strategies is one of Alger's core competencies," Tambone wrote to MFWire. "Under the Precidian model, we think actively managed ETFs work most efficiently when there are fewer holdings in the strategy, which works to our benefit. We have followed Precidian for many years and believe they have the right people within their organization to be a successful partner to us."

Ryan Sullivan, senior vice president and head of U.S. ETF services at BBH, lauds the Alger team for continuing "to bring fresh investment solutions to the collective market."

As to whether or not Alger will continue to explore ETFs in the future, Tambone wrote in a statement that Alger has "been watching the active ETF space for some time." He added: "We will continue to watch this space after we officially make these two products available in 2021 before we make plans to expand our offerings. That being said, we do feel that we are positioned to be competitive in the active ETF space based on our strengths in managing outperforming fundamental, bottom-up equity strategies since Alger's inception."

This kind of non-transparent, or "translucent" ETF was first approved by the SEC last year. Precidian's ActiveShares are one of several competing translucent ETF structures now available.

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