An $850 Billion Insurer Still Seeks a Bond-ETF Partner

(Bloomberg) -- Finding the right partner can be hard, even if you’re a seemingly desirable multibillion-dollar insurance behemoth.

John Hancock Investments, which manages more than $104 billion of the $850 billion in assets overseen by its parent, Manulife Financial Corp. of Toronto, is still seeking the perfect match for its ambitions in debt exchange-traded funds, more than a year after it started meeting potential suitors.

“It’s been a challenge for us to find the right manager who’s willing to be transparent and also has broad enough capabilities,” said Steve Deroian, John Hancock’s U.S. head of ETF product, in an interview at the firm’s headquarters in Boston.

In the meantime, the investment manager has focused on building a series of stock ETFs it created with Dimensional Fund Advisors, Deroian said. But with that business now housing 13 funds and almost $1.5 billion, John Hancock wants to get into fixed-income ETFs -- as long as it can find a suitable partner.

Deroian is seeing some light at the end of the tunnel, as conversations have been getting more productive over the last six to eight months, he said. Identifying the right investing styles will be key, as roughly half of the debt ETFs started this year have been actively managed or use so-called smart beta strategies, which are weighted by investment factors other than market capitalization for stocks and the amount of outstanding debt for bonds, according to data compiled by Bloomberg.

“We haven’t found the same experience and expertise in the smart-beta fixed-income space,” he said. “We haven’t ruled it out, but we are considering active fixed-income managers as well.”

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