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Flocking to ETFs

Bill Thomas wants to get active investors interested in exchange-traded funds.

It took a credit crisis of historic proportions to get active investors interested in exchange-traded funds, which must disclose their securities picks every day. Letting the world know how he’s investing isn’t exactly what Bill Thomas wants to do, but the CEO of Grail Advisors, a start-up devoted to actively managed ETFs, says there’s no better option now, given that the mutual fund industry is reeling from record equity redemptions from traditional open-ended mutual funds in 2008.

"Active investors are asking how they can differentiate themselves from other managers once investors come back into the market," explains Thomas, former head of distribution for mutual fund giant Charles Schwab Investment Management. "They’re saying, ‘I could be one of 450 large-cap mutual funds, or I could be the one large-cap value ETF.’" When Grail first sought subadvisory mandates from active managers, "Some firms were polite but said, ‘No thanks.’ Now we’re getting inbound calls," Thomas notes.

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