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FMI Large Cap ETF Coming Soon

The move follows other active managers.

Milwaukee-based Fiduciary Management Inc. plans to debut its large-cap strategy as a semi-transparent exchange-traded fund, according to a May 5, 2021, regulatory filing. The roughly $9.5 billion strategy has been in outflows for years and is now 40% smaller than at its late-2014 peak.

FMI’s decision to enter the ETF marketplace comes in the wake of other active managers doing the same, including Capital Group and T. Rowe Price. The ETF wrapper comes with certain advantages relative to traditional open-end vehicles, most notably tax efficiency and lower fees. Capacity management is a disadvantage, though. Firms cannot close ETFs to new investors to preserve market-cap flexibility as they can with an open-end funds.

FMI has been a standout within the industry for its capacity conscious approach to managing money. Indeed, all three of its open-end funds have been closed to new investors at various points, including FMI Large Cap FMIHX prior to mid-2016.

FMI is still sensitive to capacity concerns. The firm has no plans to offer ETF versions of its small-cap or international strategies because of the more limited liquidity within their investment universes. The firm is also confident that its large-cap strategy could become roughly 4 times its current size before capacity would be an issue. Even then, it would have levers to pull to stem investment flows, including closure of the separately managed account and open-end versions of the strategy.

The investor and institutional shares of FMI Large Cap retain their Morningstar Analyst Rating of Gold.

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About the Author

Alec Lucas

Director of Manager Research
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Alec Lucas is director of manager research, active funds research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is a voting member of the Morningstar Medalist Ratings Committee for U.S. and international fixed-income strategies, covers fixed-income strategies from asset managers such as Baird and American Funds.

Lucas is also active in parent research. He is a voting member of the U.S. parent ratings committee and previously served as the lead analyst for Franklin Templeton, Capital Group, and Vanguard, among other firms.

Lucas was a strategist on Morningstar's equity strategies team prior to assuming his current role in June 2022. He covered equity strategies from asset managers such as Primecap and American Funds and received the 2019 Citywire Professional Buyer Rising Star Award.

Before joining Morningstar in 2013, Lucas worked as a minister as well as a professor for Loyola University Chicago, among other institutions. From 2010 to 2011, he was a Fulbright Scholar at the University of Heidelberg.

Lucas holds bachelor's degrees in philosophy and classics from the University of Missouri-Columbia, where he graduated summa cum laude and with departmental honors, and a Master of Divinity, summa cum laude, from Trinity International University. He also holds a doctorate in theology, with distinction, from Loyola University Chicago and has published several articles and one book within that field.

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