Road to Exchange: Exchange Traded Concepts

In preparation for the Exchange Conference, VettaFi CMO Jon Fee sat down with Garrett Stevens, CEO of Exchange Traded Concepts, to discuss many topics surrounding the pair’s expectations for the conference in February of 2024.

Road to Exchange: Exchange Traded Concepts

Jon Fee: Garrett Stevens, CEO of ETC, joining us live from Oklahoma City. It’s great to see you. The weather behind you looks pretty similar to how it is here in California. It’s raining and gloomy because we’re coming to the end of 2023. We’re going to talk about the road to Exchange. I’m looking forward to the Miami weather February 11-14. It’s going to be a killer conference.

Hey, Garrett, for folks who don’t know ETC, can you give us an overview? Like, what do you all do in the industry?

Garrett Stevens: You bet. We’re ready to get to the beach. So ETC is a white-label ETC. We are in fact the very first white-label ETF issuer in the world. Our business goes back about 13 years at this point, but we create and launch exchange-traded funds for money managers, mutual fund companies, investment advisors, and wealth managers all over the world.

So we have clients from South Korea to Europe to folks in Canada, Australia, and all over. So we can take their intellectual property, take their ideas, and create a custom ETF, utilizing their intellectual property, and launch an ETF for them here and list them on the stock exchanges in the U.S.

Jon Fee: That’s awesome. And I know you guys work across equity and fixed income. You even work with my friends over at Bitwise here in San Francisco in the crypto space. You kind of have your fingers in all the different types of thematic ties of where ETC and ETFs are going. This year, as it is coming to an end, it’s all about 2024 right now. When you’re down in Miami at the Exchange conference, what are some of the products and solutions you’re most interested in talking to your clients and prospects about?

Garrett Stevens: A lot of the trends that we’re actually seeing in the ETF world right now is kind of the evolution of what has historically been so many index-based products being launched that’s transitioning a lot to investment advisors. Money managers really feel like they need to offer the ETF wrapper. The tax efficiency of the vehicle is so fantastic they feel like they need that arrow in their quiver to be able to offer clients.

If they’re running an SMA strategy or maybe they have mutual funds already. The tax advantages in being able to take their taxable clients and say, look, we can do this same strategy we’ve been doing for you in your accounts. Let’s put it in an ETF and maybe we don’t have any capital gains for you ever again. We run something like 65 ETFs right now.

I don’t think we have any capital gains distributions this year for our clients. So the ETF vehicle is so good for that. You know, why would you not want to take what you’re already doing, put it into this wrapper, and then be able to give your clients that tax-advantaged growth? And so that’s what we’re talking to people about, is being able to do that.

And that’s been such a big trend. You know, we’ve made it so much more affordable to be able to launch these products for people. We handle all the back office. We’re doing all of the work associated with everything from trading. We do custom websites for everybody, marketing materials, and certainly all the legal and regulatory filings associated with it, so it just makes a ton of sense.

So that’s really what we’re seeing is this growth in the ETF industry of launching custom products for individual firms, even if they just have some clients who want to use it just for their clients and even market funds. They’re like, “We don’t care if anybody else buys it. We’re just using this as a tool for our clients.” It’s been great.

Jon Fee: Love it. I don’t know if we’ve ever talked about the ice cream analogy, but I’ve always thought of your strategy as ice cream flavors. It could be chocolate, it could be a rocky road, it could be some exotic vanilla. The wrapper is the cone, but it could be a cup, an ETF, it could be a cone, or a mutual fund. But the strategy is really the same underlying and giving more customers, more clients, more prospects, options for how they’re going to take that ice cream home is very good for your business, especially today, given that there are benefits in the cup versus the cone. You know, there are preferences for the cup versus the cone.

Back to the Exchange Conference: I know you’re going to be down there and I’m excited to see you. Who else from ETC is joining us?

Garrett Stevens: We’re going to have several of our team members down there. So Todd Alberico, one of our portfolio managers, is going to be joining us down there this year. Dan Carlucci, one of our marketing team members, is going to be joining us as well. We may have one or two other folks with us, but trying to cover some of the different bases from our firm to be able to meet with clients, existing clients, certainly join us as well and come come support the event with us.

What’s great is being able to have our clients there, meet new prospects there, and then all of the service providers. This is an industry event as well. So having everybody in one place at the same time works out great to be able to network and talk to people. And we can really get a lot of work done in a very short amount of time and meet a bunch of people.

So we’ll have a whole team down there. We’re going to be out, and have a cabana, the island cabana right in the middle of the pool this year, which is a great place to be in Miami in February, surrounded by a big swimming pool. So we’re going to enjoy that and have a lot of folks there and it will be good to talk to new people.

Jon Fee: Awesome. I was just going to ask you, where can folks find you and your spot. You guys are going to be out in the cabana at the island cabana. It’s very hard to miss. And I love what you said about the community. There’s a lot of effort going into the Exchange conference. There are a lot of areas.

There are a lot of issuers of all sizes, index providers, exchanges, market makers, legal teams, and law firms that are focused on the growth and the evolution of the ETF vehicle.

Like the whole communities there. I love this idea of you know, you as ETC can get an RIA that wants to launch a product together with maybe an index provider together with maybe a market maker together with maybe someone from legal, all on that island cabana. And start taking the idea to like, how are we going to bring this to market?

Garrett Stevens: Yeah, and that’s our job, right? You know, we quarterback. We kind of consider ourselves as a quarterback or air traffic control; the whole process of launching and running an ETF. We work with all of those , but having everybody in one place at the same time is great. Once a year to go sit down and are able to say, look, ordinarily our clients may not interface directly with the fund’s auditors, for instance. It’s not something that they do.

But here we can say, look, let’s go talk to them. Maybe we can ask them questions about valuations and fair values of different things that come up over the course of the year that are helpful when they’re making decisions about investments next year and tax issues and things like that that are good to know for their shareholders.

So those are the things that we’re doing all day long, down at the conference, having these one-on-one conversations with people and trying to make those connections. And so it works out really well.

Jon Fee: Love it. I think we’re going to rename the Island Cabana to the Air traffic Control for ETF innovation.

Garrett Stevens: It’s really what it is.

Jon Fee: 100%. I love that. All right. I know I don’t have you all day. I’ve got one more question for you. Outside of all the networking and you guys quarterbacking a lot of the networking down there, what is some of the content you’re most interested in looking forward to seeing out of that at the Exchange conference?

Garrett Stevens: There’s always a lot of great content. I know this year, AI topics of course are going to be big. I mean, we have several funds that are investing in themes. We have zero funds that are run by artificial intelligence. In fact, that’s a hot topic at our company and around the world. I know Zeno Mercer is going to be talking about some of the different topics as well.

The future of finance is a topic, I think that they do typically every year and is always an interesting one. You know, we all get so bogged down in time, like what we’re doing just day to day. It’s nice to kind of go sit down and look in the future a little bit and kind of think bigger picture. So yeah, I always look forward to that one.

Jeffrey Gundlach is going to be there talking, I understand. You know, we run some fixed income products for folks and we are looking to doing more of that. Obviously, interest rates and the bond markets are top of mind for the whole economy at the moment. So, he has the ability to move markets when he’s talking.

So we’ll see what he has to say. And so, you know, lots of good things that that we’re going to be looking forward to.

Jon Fee: The topics at the top of your list of AI are huge for me. I want to know what’s going to happen next in business applications, new products, and fixed income. We’re coming off of the year of fixed income. I don’t see it slowing down in 2024, which is huge. And it’s always great to hear Gundlach on those topics. I know I gave a shout-out to Bitwise earlier and Matt Hougan’s going to be there talking about it. I know you guys work together. It’s also going to be another big topic for us.

And then, yes, everything Dave Nadig’s doing on the future of finance is definitely going to be getting folks thinking about what’s next.

Garrett, I’m grateful for this time together. I hope you have a wonderful holiday break. Thank you for joining me on the road to Exchange. I will see you in Miami February 11-14 at the conference.

Garrett Stevens: Looking forward to it. Thanks, John. Appreciate it.

Register for Exchange 2024 here. 

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