Macro
Tremblant Capital launches TOGA ETF, signaling hedge funds' shift to active ETFs amid $940 billion industry inflow.
By Alex P. Chase
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Tremblant Capital, a hedge fund with approximately $1 billion in assets under management, is launching the Tremblant Global ETF (TOGA), marking a significant move into the active ETF space. This ETF, a conversion from the firm's Tremblant Tax Efficient Fund, showcases a concentrated, long-only portfolio with around 40 holdings and has generated a return before tax of 36.2% in 2023. The management fees for investors are set at 0.69%, offering a cost-effective alternative to traditional hedge fund fees and providing tax advantages and better liquidity.
The global hedge fund industry has seen $105 billion in outflows last year and nearly $26 billion more in the first quarter of 2024, contrasting sharply with the $940 billion inflow into the predominantly low-cost ETF industry in 2023. Hedge funds traditionally operated on a 2 and 20 fee structure, but the average fee for an actively managed ETF in the US is now around 0.65%, according to Morningstar. Brett Barakett of Tremblant Capital highlighted the move to ETFs as a strategy for preferable tax treatment and greater liquidity, anticipating a trend where hedge funds offer strategies to retail investors through ETFs.
The launch of TOGA joins a select group of US ETFs initiated by hedge funds, with names like Gotham Asset Management and Chesapeake Capital Management among them. This move could signal a broader trend of hedge funds entering the ETF market, offering high-quality investment strategies more accessible to a wider range of investors. Industry experts, including Douglas Yones of the NYSE and Ted Seides, foresee this as the beginning of a significant shift towards active ETFs by hedge funds, aiming to tap into the vast pool of retail assets.
Douglas Yones, New York Stock Exchange (Neutral on hedge funds entering the ETF market):
"I don’t think this is a short-term flash in the pan."
Ted Seides, Protégé Partners Co-founder (Bullish on hedge funds entering the ETF market):
"I think that this could be the very very beginning of a wave of very high-quality products that are more accessible than they were in the past."
"The red velvet rope is now going away... They will follow. We’re not the only commercially oriented animals."
Finance GPT
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