Hotchkis & Wiley, a 45-year-old asset manager, is the latest mutual fund shop to step into the fast-growing ETF space.
The Los Angeles-based asset manager is planning a new small- and mid-cap value strategy for its first foray into exchange-traded funds, according to a filing with the Securities and Exchange Commission.
The H&W SMID Cap Diversified Value Fund, which does not yet have a ticker symbol, will be an actively managed strategy that follows the company’s long history of value investing.
According to the filing, “under normal circumstances, the fund will invest at least 80% of its assets in stocks of small to medium-sized companies” that Hotchkis & Wiley Capital Management considers undervalued.
The fund’s market capitalization will be between $8 million and $48 billion.
While the new ETF is not specifically marketed as ESG, portfolio management will take into account specific environmental, social and governance factors when managing the 150 to 200 stocks in the portfolio.
“As part of the Adviser’s investment process, the investment team evaluates the general and sector-specific environmental, social and governance factors that the Adviser believes are most financially material to a company’s business value over the short, medium and long term. “, the file said. “The Advisor believes this evaluation contributes to its overall analysis of a company’s shareholder value creation and future financial performance.”
The ETF will be overseen by Hotchkis & Wiley co-managers Judd Peters and Ryan Thomes.
The firm manages a total of $33 billion across nine mutual funds, with a lineup of six U.S. equity funds, three international equity funds and one high-yield fixed income fund.
The company declined to comment while the ETF awaits SEC approval, but the new fund is not a clone or conversion of an existing mutual fund and will be a new strategy for Hotchkis & Wiley.
The migration toward ETFs and away from mutual funds has been a multi-year trend, highlighted in 2024 with a record $1.1 trillion in ETF inflows, compared to $600 billion in ETF inflows during each of the previous two years.
Along the same lines, mutual fund to ETF conversions set a record in 2024 with 55 conversions, compared to 35 in each of the previous two years.
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