PGIM Fixed Income Podcast Series, All The Credit: Episode 14
In this episode, Mike Collins, CFA, Senior Portfolio Manager welcomes three colleagues to discuss asset allocation in today’s markets.
Matt Collins, Co-Head of Exchange-Traded Funds at PGIM Investments highlights PGIM’s all active approach to the ETF market with fixed income and equity solutions
PGIM Investments, LLC
Matthew Collins, CFA
Vice President, Exchange Traded Funds
As we've looked at the ETF industry prior to us joining the space, we sort of saw three main tiers to the growth of the market. The first and sort of most well-known was traditional, passive investing. Market-cap weighted ETFs at a low cost. The second wave, and it's still sort of progressing over time was the alternative weighting, or smart beta, but also passive. I think there's been two main issues though, with each of those spaces. On the passive side, the pendulum has really swung pretty far, in terms of usage of passive ETFs and mutual funds. But on the smart beta side, what we've heard from clients is they're struggling to understand how that fits in a portfolio, primarily because there isn't a track record, and they're all doing very different things.
So, that brings us to active ETFs, what we believe is sort of the third phase of growth in the ETF space. We are bringing what we do well, active management straight to the ETF wrapper, but also the same benefits you're seeing on the other side, low cost investing, and a liquid wrapper. And we think that's gonna be really attractive for clients.
As we looked, a lot of the headlines have been clients moving towards passive. From our perspective, it's been clients moving towards low-cost vehicles. And active hasn't necessarily caught up, particularly in the ETF space. There hasn't been a lot of competition in that space. So, if we feel like we can bring our experience track record that we have managing a variety of wrappers, in a low-cost ETF wrapper from the same managers who know, we feel like clients will really start to pick that up, and that's really what they're looking for.
High yield ETFs have been, I would say, one of the more challenging wrappers in the ETF space. A lot of clients struggle using high yield ETFs. But on the flip side, there hasn't been an alternative to what's out there. So, we have a team that manages over 70 billion dollars in high yield, and high yield related assets, and they also have a five-star gold rating from Morningstar for the mutual funds they manage. We're bringing that same experience team directly to the ETF wrapper, and we feel like that is an extreme value for investors in the ETF market.
As we think about our value to financial advisors, and clients across channels, we are a trillion dollar, global, asset manager. Scale and expertise are what clients value. And we're gonna deliver both of those in active ETFs, at a passive price. So, we think that's a really attractive proposition for clients that they should continue to look out for new ETFs from [inaudible 00:02:44].