Old Money, New Wrapper: Why Active Managers Are Embracing the ETF Revolution

LOS ANGELES, CA – July 22, 2026 – Hotchkis & Wiley, a Los Angeles-based investment manager with a four-decade history steeped in value investing, announced today the launch of two new exchange-traded funds (ETFs). This move, however, is far more than a simple product line extension. By creating ETF share classes for its established International Value and Opportunities mutual funds, the firm is participating in a fundamental rewiring of the wealth management landscape—a quiet revolution where the traditional architecture of the mutual fund is giving way to the modern, more agile structure of the ETF.

This isn't just about offering investors another ticker symbol. It’s about adapting a time-tested philosophy to a new era of investor expectations. The new funds, Hotchkis & Wiley International Value Fund (HWIV) and Hotchkis & Wiley Opportunities Fund (HWO), provide a direct portal to the firm's active management strategies but are now wrapped in a vehicle prized for its intraday liquidity and tax efficiency. For a firm overseeing $38 billion, this is a calculated pivot, signaling that even the most established players can no longer ignore the powerful currents pulling capital and confidence toward the ETF ecosystem.

The Great Migration to Active ETFs

The decision by Hotchkis & Wiley is a microcosm of a massive industry-wide trend. The active ETF market, once a niche corner of the financial world, has exploded in recent years. At the end of 2023, assets in U.S. active ETFs reached approximately $600 billion, a staggering six-fold increase from just $100 billion in 2019. This growth is not happening in a vacuum; it is a direct response to evolving investor demands and a more permissive regulatory environment.

The floodgates opened wider following the SEC's approval of the "ETF Rule" in 2019, which streamlined the process for launching transparent, actively managed ETFs. Since then, giants of the industry like Capital Group, T. Rowe Price, and Dimensional Fund Advisors have either converted flagship mutual funds into ETFs or, like Hotchkis & Wiley, launched parallel ETF share classes. This dual-structure approach allows firms to cater to both their legacy mutual fund clients and a new generation of advisors and investors who build portfolios almost exclusively with ETFs.

"The strategies for these ETF share classes are identical to those of the existing mutual funds, backed by Hotchkis & Wiley’s experienced investment teams," said Scott McBride, Chief Executive Officer of Hotchkis & Wiley, in a statement. He emphasized the move pairs the firm's "disciplined approach" with "the added benefits of intraday liquidity and tax efficiency that ETFs can offer.”

This tax efficiency is a key driver of the migration. Unlike mutual funds, which must often sell securities and distribute capital gains to shareholders when they meet redemptions, ETFs typically use an "in-kind" creation and redemption process. This mechanism allows them to swap out securities without triggering a taxable event for the fund's remaining shareholders, a structural advantage that can significantly enhance after-tax returns over time.

A Modern Vehicle for a Classic Philosophy

While the delivery vehicle is new, the investment engine is deliberately old-school. Founded in 1980, Hotchkis & Wiley has built its reputation on a disciplined value philosophy: buying companies at a substantial discount to what it determines is their intrinsic worth. This often means investing in businesses that are out of favor or under-followed by Wall Street, a contrarian stance that requires patience and deep conviction.

The two new ETF offerings embody this approach. The International Value Fund (HWIV) builds a concentrated portfolio of 40-80 companies located outside the U.S., seeking durable businesses with shareholder-friendly management. The Opportunities Fund (HWO), meanwhile, takes a more flexible and opportunistic path. It holds 45-75 of the firm’s “best ideas” and is not afraid to venture into special situations like merger arbitrage, bonds, and preferred stock, seeking value wherever it can be found.

This commitment to a specific, research-intensive style is the firm's primary selling proposition in an increasingly crowded market. While some managers compete on having the lowest fees, Hotchkis & Wiley is betting that investors will pay for expertise. The expense ratios for the new ETFs—0.70% for HWIV and 0.90% for HWO—are competitive within the active management space but are not designed to undercut the lowest-cost providers. The firm’s differentiation lies in its stable, experienced team, whose members average 27 years in the industry, and its willingness to make high-conviction bets, such as the Opportunities Fund's significant position in Workday Inc.

Navigating a Competitive Landscape

Hotchkis & Wiley’s expansion is not without its challenges. The firm is stepping deeper into an arena where behemoths like Dimensional Fund Advisors have already converted billions in mutual fund assets and established a strong presence. The firm's first standalone ETF, the SMID-Cap Diversified Value ETF (HWSM) launched in 2025, has had a modest start in a competitive field, a reminder that a strong brand and a sound strategy do not guarantee immediate asset flows.

Success in this new era requires more than just a good track record; it demands a clear value proposition that resonates with advisors and investors who have more choices than ever before. By offering its core strategies in a more accessible format, Hotchkis & Wiley is making a strategic wager that its long-term, disciplined approach to value investing is exactly what investors are looking for, even if they now prefer to buy it through the convenience of an ETF. This move is less about chasing a trend and more about ensuring a four-decade-old philosophy remains relevant and accessible for the next four decades of market cycles.