Registered investment advisors are beginning to take a closer look at exchange traded funds as an efficient vehicle to manage client assets and attract a wider investor audience.
Over the past year, Vident Financial, WBI Investments and Tiedemann have launched ETFs, and ETF consultants and service providers point out that a number of other money managers are also considering the ETF avenue, reports Jackiet Noblett for the Ignites.
For example, many financial advisors and money managers converged in New York City late September to attend the ETF Bootcamp to learn about the ETF industry and the best practices for launching their own ETF offering. [Asset Managers Take a Crash Course in ETF Industry]
The ETF space is exploding, but the industry is still in its nascent stages and is only getting started. Asset managers from different walks of life are looking at the ETF as a go-to investment vehicle to get their strategies across to a wider audience. However, there are some unique regulatory challenges when adopting the ETF structure. [ETF Boot Camp: In the Glow of ETF Stars]
For wealth managers, ETFs are seen more as a vehicle to manage client assets more efficiently than separate accounts and service clients with less assets.
“This was first and foremost done for our clients,” Paul Buongiorno, managing director and chief investment strategist at Tiedemann Wealth Management, said in the Ignites article. “But to the extent that the strategy is applicable to someone looking for a large-cap strategy, that’s certainly a benefit.”
Specifically, these managers launched the ETFs and seeded their offerings with client assets, so the funds began trading with more assets under management, hit profitability faster and were more quickly noticed by other advisors and retail investors.
“It’s a huge advantage,” Mike Castino, senior vice-president at US Bancorp Fund Services, said in the article. An new ETF with assets of $25m or more and regular inflows “gives it a perceived stamp of industry acceptance.”
For instance, the Deep Value ETF (NYSE: DVP), which was brought to market on Oct. 8 by Exchange Traded Concepts, LLC and Tiedemann Wealth Management, has $127.9 million in assets under management and trades with an average daily volume of about 297,000, according to Morningstar data. [Going Deep for Value Brings Success for This New ETF]
Last year, Vident Financial came out with the successful Vident International Equity Fund (NasdaqGS: VIDI), which has $704.7 million in assets, and recently launched the Vident Core U.S. Bond Strategy ETF (NasdaqGS: VBND), which has $79.7 million in assets. [Vident Bolsters ETF Lineup With New Bond Fund]
The money managers are also opting to partner with white label, or turnkey, ETF service providers. ETF issuers like Exchange Traded Concepts, ActiveETF Partners, Golden Gate Investment Consulting LLC, ALPS, AdvisorShares and ETF Issuer Solutions, among others, help go through the regulatory approval process, provide a board of directors and get an ETF listed on an exchange for $20,000 to $100,000 in startup costs. [The White Label Avenue to Launching an ETF]
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.