Two hundred seventy-six. That’s the number of ETFs available to investors in 2003. Fast forward to the end of 2021 and there were more than 8,500, with another 200+ products launched in the first half of 2022. It’s a crowded market from a new issuer’s perspective where the rationale to launch a fund needs to be convincing. I launched THLV on the NYSE on September 13; the first of a family of exchange traded funds from THOR Financial Technologies. As one can imagine, submitting a fund prospectus to the SEC, understanding new regulatory requirements, securing a board of directors and everything in between comes with its lessons learned.
The launch of THLV was in the midst of a bear market surrounded by headlines that induced investor fear around inflation and increased interest rates. Despite a negative macro environment out of our control, we were one of twenty ETFs with the greatest inflows during our launch month.
Proving the business use case came down to a discussion… with every financial advisor that we do business with. The ETF we launched follows the same strategy as a model portfolio offering of ours used in investment accounts managed by financial advisors. By connecting with all of our advisor clients and listening to their frustrations around account drawdowns and cookie cutter investment vehicles, it became clear there’s a massive appetite for low volatile investments capable of producing alpha. This is the crux of what THLV brings to the market and made our decision to move forward with the launch a no brainer.
During these discussions, we explained the product we wanted to launch, the tax advantages of investing in the ETF outside of an SMA, and our goal to introduce a family of funds over time. We spoke about strategy. We spoke about why we chose to create our own trust. We spoke as a true partner, which gave us the platform to secure our early adopters.
The proof was in the numbers for the early adopters. In running THLV’s index back to its inception and reviewing every transaction we were able to determine the gross performance change on an annualized basis. The strategy in an ETF generates an additional return of 3.3% compared to an SMA, regardless of market performance. This is music to an advisor’s – and for that matter, any investor’s – ear. Creating excitement about the fund launch early in the game was instrumental to the strong start we experienced.
Following our due diligence and creating some buzz around a potential launch, we calculated that if 50% of our clients went through with an account conversion, then the fund was worth launching. Well, we’re 2 months post-launch and excited to say we shattered that number.
The process of coming to market isn’t all that nuanced, there are many resources to help with the regulatory and operational components. The biggest hurdle for us was simply the time invested to understand this new set of policies and procedures, marketing and compliance.
From a capital expenditure standpoint, the largest line item is the trust structure. We did our due diligence; reviewing the DIY route and our options to bolt onto an existing trust. Ultimately, we chose the DIY route. Understanding it’d be more time consuming and require upfront investments, it allows us control. This includes the ability to choose our own auditing firm, board members, and ultimately be the sole owner of the fund. With our own trust, launching future funds becomes much simpler and there are significant economies of scale that will come into play.
Listen to potential early adopters. Be transparent in long term strategic plans. Investment managers make decisions based on tired trends and quantitative services; they need help. Support the early adopters to help them find investments that distinguish them from the advisor down the block. This is how to secure the core set of investors who will champion a fund to the street.
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Investors should consider the investment objectives, risks, and charges and expenses of the Fund before investing. The prospectus contains this and other information about the Fund and should be read carefully before investing. The prospectus may be obtained at 800-974-6964 or by visiting https://www.thorfunds.com/
Risk Considerations:
Past performance is no guarantee of future results. The Fund is newly formed and has no operating history. ETF’s are subject to specific risks, depending on the nature of the underlying strategy of the fund. These risks could include liquidity risk, sector risk, as well as risks associated with fixed income securities, real estate investments, and commodities, to name a few. The Fund may be susceptible to an increased risk of loss to the extent that the Fund’s investments are concentrated in the securities of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector or asset class. While the shares of ETFs are tradeable on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress. ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. Brokerage commissions and ETF expenses will reduce returns. There is no guarantee that the Fund will achieve its objective.
The THOR Low Volatility ETF is distributed by Northern Lights Distributors, LLC, Member FINRA/SIPC. THOR Financial Technologies is not affiliated with Northern Lights Distributors, LLC.
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