Markets

Dreyfus Planning Passive ETFs Too

Dreyfus, which announced a bit more than a month ago that it aims to offer a line of actively managed ETFs, expanded its plans in a new filing with the Securities and Exchange Commission that lays the groundwork to market index-based ETFs too.

Dreyfus, which has collaborated with New York-based WisdomTree in marketing currency ETFs such as the WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca:CYB), may be taking a cue from its partner, a pioneer in fundamentally weighted ETFs.

The filing describes a line of hybrid funds that will track market-capitalization-weighted indexes while also taking into account fundamental factors such as corporate earnings and dividend yield.

New York-based Dreyfus' foray into the world of exchange-traded funds make it the latest in a string of venerable firms to unveil plans to take part in an industry whose assets are fast approaching $1 trillion. One of those other firms, J.P. Morgan, also filed with the SEC to offer both passive and active funds, but in one fell swoop.

Initial Fund

The initial fund will track an index of global equity securities "weighted by market capitalization and certain other factors, including earnings quality and dividend history." The Dreyfus ETF Trust will sponsor the fund, and the Dreyfus Corporation will act as adviser to the fund, the filing said.

At least 80 percent of the initial fund's net assets will be invested in the component securities of the underlying index. The fund may hold up to 20 percent of net assets in what Dreyfus refers to in the filing as an "asset basket" of futures, options and swaps contracts, as well as cash and other securities not included in the index. Dreyfus didn't identify the index provider in its latest exemptive relief filing.

Exemptive relief filings grant ETF firms exceptions to some sections of the Investment Act of 1940 and are just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company's first ETF to hit the market.

Dreyfus was one of the first mutual fund companies in the U.S. and the first to advertise to potential investors.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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