One of the important recent developments in the exchange-traded fund business has been the entry into the space by giant financial services companies. We’re talking Goldman Sachs, J.P. Morgan, John Hancock, Nationwide and others (apologies to those companies lumped into the “others” category). These companies bring brand recognition and marketing muscle to the table, and in some cases they’re combining their active management acumen and financial heft to launch funds with sophisticated strategies at compelling price points. 

And now you can add Prudential to that list with the rollout earlier this month of the PGIM Ultra Short Bond ETF (PULS), a diversified fixed-income, actively managed ETF that comes with a competitively priced expense ratio of 15 basis points.

This product was launched by PGIM Investments, which has more than 100 funds globally across various asset classes and investment styles. PGIM Investments is one of a collection of autonomous asset management units under the umbrella of PGIM, which is the global investment management business of Newark, N.J.-based Prudential Financial Inc. All told, PGIM has more than $1 trillion in assets under management, and the PGIM complex appears well-positioned to make a bigger ETF splash. ETFA recently spoke with Scott Benjamin, executive vice president and head of product development and marketing at PGIM Investments, to get a sense of what his company has in mind regarding its place in the ETF space.

ETFA: Welcome to ETF Land. Not to sound snarky, but what took you so long?

Benjamin: It was deliberate in terms of where we are in the evolution of bringing out what I call a ‘vehicle agnostic’ strategy. Like a lot of folks, we sort of grew up on ’40 Act open-end mutual funds, and we’ve been concentrated over the past five years or so on revamping and bringing out products on that end by leveraging the core capabilities across our four asset managers at PGIM—we have Jennison [Associates], an active equity shop; QMA, which does equities on the quant side with smart beta; PGIM Fixed Income and PGIM Real Estate. Overlapping that we also pursued an international strategy and we launched roughly 15 to 20 UCITs [Undertakings for Collective Investment in Transferable Securities] during that time.

By their nature, ETFs take a little longer to develop. And with ETFs we really wanted to do it right. We didn’t feel like we were late because we weren’t going to enter the passive space. As an active shop, we believe in active management and wanted to pursue an active strategy. We went through the necessary filings to be eligible to bring out active products. We didn’t feel an undue rush to get out there because the active space is still developing and we were in the process of building our brand globally. But we think the timing for this [the PULS fund] was right.

ETFA: I see the PULS fund already has $27 million in assets. Is this the result of seeding money from you folks, or is much of this fresh investor money?

Benjamin: We actually seeded it with $25 million. The incremental assets into the fund have been modest, but we didn’t expect much in the early going and it will take more time for the flywheel to develop and to get more momentum going. But we’re excited with the interest we’ve received in terms of people recognizing it without a lot of marketing at this point.

ETFA: Why did you start with this particular ultra-short bond ETF?

Benjamin: We have a ton of expertise across the spectrum that I previously mentioned, and in particular fixed income is a $700 billion-plus shop within the PGIM asset managers. While we have a good amount of short-duration strategies, we thought the ultra-short space was probably best fulfilled in an ETF vehicle because of the cost-efficiency standpoint. It comes out at 15 basis points, which is well-positioned within this category.

We have a long-term commitment to this, so our expectation is the other asset managers on our platform—including more fixed income—will result in more [ETF] products.

ETFA: What types of ETFs does your company envision rolling out? I assume it will be across the entire PGIM asset platform.

Benjamin: That’s our assumption as well. We believe there will be a place for actively managed ETFs across our asset managers. I think the beginning will focus on fixed income. And with QMA, which again is our quant equity and asset allocation group, there’s a place for smart beta or strategic beta or dynamic beta products that would fulfill that space.

We don’t have any additional filings [with the Securities and Exchange Commission] at this point, but from a strategy standpoint we expect to lever all of our asset managers. We have a long-term commitment and we’re not in this to launch just one product.

ETFA: Like with how Goldman Sachs has approached ETFs, do you see Prudential coming at this by using your active management expertise and ability to roll out low-cost funds as being your calling card with ETFs?

Benjamin: I think that’s right. On a high level, we view ETFs as another vehicle or wrapper to put our investment strategies into. We look at the ETF strategy as an extension of our making sure we have the right vehicles that our clients are looking for. And specifically with ETFs, we see this as an actively managed product designed with costs in mind.

ETFA: Overall, what does Prudential hope to achieve in the ETF space, and how important will ETFs become in Prudential’s overall product line?

Benjamin: It will become as important as our clients tell us in terms of them looking for these types of vehicles. As a global asset manager we want to have the right vehicles for our clients, and we’re seeing greater interest in ETFs. We didn’t want to look back five years from now and say, ‘I wish we developed that ETF platform because those vehicles took off even more than we expected.’ We think it’s the right strategic move to have this ETF optionality on our platform.