Exchange Traded Concepts, a boutique exchange traded fund provider, partnered with Toroso Investments to launch the first ETF that focuses on companies and fund providers directly participating in the growth of the ETF industry.
ETC and Toroso Investments recently rolled out the ETF Industry Exposure & Financial Services ETF (NYSEArca: TETF). TETF has a 0.64% expense ratio.
“We have deep roots in the ETF ecosystem and have created an Index that captures the dynamism of ETFs and the disruptive innovation they have brought to the financial services industry,” Mike Venuto, CIO of Toroso Investments, said in a note.
It is no big secret that the ETF industry itself is growing as investor interest increases for the cheap, cost-efficient and accessible ETF investment vehicle. As the ETF’s continue to attract huge inflows, the fund providers and financial companies that have launched these ETFs have also reaped the rewards.
Through TETF, investors can also gain broad exposure to those fund sponsors that have benefited from the huge growth in ETFs. Over the past five years, assets have grown to $2.7 trillion from $1.2 trillion, and the number of ETF sponsors increased from 45 to 78. Additionally, the average ownership of U.S. equities by ETFs has more than tripled.
TETF tries to reflect the performance of the Toroso ETF Industry Index, which tracks publicly-traded companies that directly or indirectly provide services or support to ETFs, including management, servicing, trading or sales of ETFs.
These companies include ETF sponsors; asset managers; index providers; broker-dealers; securities exchanges; and service providers, such as custodians, transfer agents, and administrators, according to the prospectus.
Companies eligible for inclusion on the index are broken down to four tiers. Tier A are comprised of those whose participation in ETF activities is substantial and results in direct financial impact to company shareholders, including investment advisors to and sponsors of ETFs. This tier makes up 50% of the index weight, including BlackRock, Charles Schwab, Invesco, State Street, WisdomTree, and more.
Tier B includes those with substantial participation in ETF activities and indirect financial impact to company’s shareholders. This tier makes up 25% of the index weight, including KCG Holdings, NASDAQ, Intercontinental Exchange, Inc., and more.
Tier C includes those whose participation in ETF activities is moderate and results in indirect financial impact to shareholders, which include companies that generally provide support services to participants in the ETF industry. This tier makes up 15% of the index weight, including Bank of New York Mellon, US Bancorp, FactSet, Ameriprise Financial, and more.
Lastly, Tier D includes companies that recently began to participate or have minor participation in ETF activities. This segment makes up 10% of the index weight and includes such names as Morningstar, Eaton Vance, Goldman Sachs, Legg Mason, Citigroup, and more.
“Not only are we seeking to capture the performance of the industry, but we’re also looking to bring together many of its leaders to leverage their authority as we monitor, research, and benchmark the category’s potential future growth,” Guillermo Trias, CEO of Toroso Investments, said in a note.
For more information on new fund products, visit our new ETFs category.