BNY Mellon, one of the world’s largest asset managers with $1.8 trillion in assets under management (as of 4/16/2020), recently joined the ETF arena with a line-up of eight ETFs. ETF Trends had the opportunity to interview Stephanie Pierce (pictured above), CEO of BNY Mellon Investment Management’s ETF and Index Business, to discuss the evolution of the company and its foray into ETFs.
Why is BNY Mellon getting into the ETF business now?
Our aim is to strengthen and deepen our relationships with our clients by continually delivering relevant investment products and product structures that meet their evolving needs. This is why we are making our leading institutional-quality investment solutions available to a wider range of clients through the fund structure of an ETF.
BNY Mellon’s 30-year history in indexation and industry leadership in ETF sub-advisory enables us to deliver a range of index ETFs that clients can trust. Powered by BNY Mellon’s end-to-end ETF platform in servicing, brokerage, capital markets, and securities lending, our ETFs are priced to deliver exceptional value to our clients.
Why have you selected these eight strategies to launch the ETF business?
These eight U.S.-listed ETFs are designed to cover most of the core exposures in a typical strategic asset allocation plan and to complement the existing investment capabilities from our investment firms.
Why launch BNY Mellon US Large Cap Core Equity ETF and BNY Mellon Core Bond ETF as the only zero-fee offerings?
The BNY Mellon US Large Cap Core Equity and Core Bond ETFs will mark the first time zero-fee ETFs have been offered in the largest equity and fixed income categories in the US ETF market from a leading financial institution. These are being offered at zero fees to our clients with no waivers, no limitations, and no restrictions. With our ETFs, clients can build a 60/40 balanced portfolio and gain the benefits that lower expenses can have on their long-term returns.
BNY Mellon has been a big part of the ETF-ecosystem for years. Does this bring you full circle?
BNY Mellon is a leading player across the entire ETF ecosystem, from asset servicing and fund administration to brokerage to capital markets and securities lending. The scale and breadth of ETF services across the BNY Mellon enterprise enables us to deliver compelling value for our clients in a way that few other large institutional-quality asset managers can do.
How did BNY Mellon’s legacy include index investing?
BNY Mellon Investment Management has been managing indexing strategies for more than three decades for some of the most sophisticated institutions globally. The co-founder of our index business, Bill Fouse, is widely recognized for developing the first-ever index strategy in the marketplace in the 1970s and the research-driven, client-focused approach to index investing he established continues to this day. Today, our index team manages $340bn for institutional and retail clients globally.
How have your clients guided you to be in this space?
As a leading global asset manager, we are always working to strengthen and deepen our relationships with clients by continually delivering relevant investment products that meet their evolving needs. We know very well that our clients are voting with their feet. They are increasingly using ETFs in their portfolios to achieve a wide range of investment objectives. This is why we are making our leading institutional-quality investment solutions available to a wider range of clients through the fund structure of an ETF.
BNY Mellon’s suite of indexed ETFs offers clients an institutional-quality choice at a compelling value from a firm they can trust. Clients now will have a compelling alternative to the existing ETF issuers in the marketplace to help diversify their assets and reduce concentration risk from a provider with a deep history in indexation and sub-advised ETFs.
Is the BNY Mellon suite of ETFs different?
Our ETF range draws upon BNY Mellon Investment Management’s deep investment experience and industry leadership to deliver a range of index ETFs clients can trust.
There’s a combination of over three decades of experience from Mellon as one of the pioneers in index investing and one of the largest ETF sub-advisers.
Additionally, BNY Mellon currently manages $340bn in index assets for institutional and retail clients globally and is one of the largest ETF sub-advisers, managing over $44bn in ETFs for clients.
The co-founder of our indexing business, Bill Fouse, is widely recognized for developing the first-ever index strategy in the marketplace in the 1970s and the research-driven, client-focused approach to index investing he pioneered continues to this day.
BNY Mellon’s enterprise-wide end-to-end ETF platform enables us to offer competitively priced ETFs to our clients. The BNY Mellon US Large Cap Core Equity ETF and BNY Mellon Core Bond ETF will mark the first time zero-fee ETFs have been offered in the largest equity and fixed income U.S. market categories without fee waivers or other restrictions.
Of your eight ETF launch products, your BNY Mellon High Yield Beta ETF is a less traditional product. What distinguishes it and is that product a precursor of more to come?
High yield is a unique category because the transaction costs tend to be high and the benchmark is difficult to replicate. The tools and techniques we employ in managing our High Yield Beta ETF enable us to trade less frequently and hold fewer securities than the high yield index, which reduces the high transaction costs that cause many high yield strategies to underperform the benchmark. We believe that our more efficient approach to managing the portfolio will enable us to deliver the return of the benchmark more consistently than other high yield ETF offerings in the marketplace.
As we think to the future, we expect to introduce additional ETFs across various active and indexed asset classes that feature the specialist expertise and differentiated capabilities sourced from our affiliated investment firms.
Will you be introducing other ETFs in the future? What about ETF’s modeled after any of your active strategies from your investment firms? Are you considering thematic, ESG, smart beta or other asset classes?
We are excited to offer more of our leading investment capabilities through an ETF structure. While it is too early to share the details, our ETF roadmap is centered on meeting the needs of our clients and enabling them to access the specialist expertise across our affiliated investment firms.
Has the distribution of investment products changed over the years? How are you planning on embracing modern technology and data to better communicate with your clients?
From our perspective, investment product distribution has changed significantly and continues to evolve. While investment performance remains an important consideration, conversations are increasingly focused on how a particular strategy fits in a client’s portfolio to achieve a better outcome. Investors are also focused on cost as well as the ability to access the same investment strategy in mutual funds, ETFs, retail SMAs, and collective investment trusts. Decision-making is increasingly being done by professional buyers or sophisticated advisor teams resulting in more reliance on recommended lists or pre-constructed model portfolios.
Technology and data have become important linchpins in our client communications. We have increased knowledge about what advisors need and want and can be more effective in how we target and communicate with them, including how we package and send them information. We are able to leverage more sophisticated tools to analyze advisor portfolios and identify opportunities to strengthen the portfolio for the desired result. And we plan to harness digital and social media more aggressively to deliver additional thought leadership.
For more information on BNY Mellon’s ETFs, click here.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.