The ETF industry certainly continues to grow and evolve.
With the adoption of the “ETF rule” (streamlined approval process) in late 2019 and the evolution of ETF wrappers for actively managed semi/non-transparent products, ETF assets under management in the U.S. crossed over $5 trillion in 2020 with over 300 new ETFs launched. The expanding ETF landscape naturally presents investment managers with an intriguing opportunity worth careful consideration.
3 KEY CONSIDERATIONS/QUESTIONS FOR BECOMING AN ETF ISSUER:
- What Size/Age Should Our Firm Be to Consider Launching An ETF?
While there is not a particular AUM or tenure requirement, investors and fund boards typically want to see a level of experience/expertise and capital to support the funds growth. Having 7+ years of investment management experience/expertise and $250M+ in AUM are good starting points. This does not mean there is not an opportunity for emerging managers with less tenure or assets, just more likely to require additional persistence and patience.
- What Additional Resources Do We Need to Manage An ETF?
Portfolio Management and Distribution are the two most important aspects for any fund.
- From a portfolio management standpoint, an ETF is a single pool of assets that is traded/managed, making it an efficient vehicle for portfolio management. There are some compliance requirements, but it is typically manageable with current resources within a firm.
- From a distribution standpoint, the ETF industry is very competitive and requires a diligent and multi-faceted marketing and sales plan to garner investor attention. Additional sales and marketing resources (internal and/or external – branding, PR, digital marketing, etc.) are typically the most needed resources for firms entering the ETF space. Like portfolio management, distribution is a daily mission requiring dedicated resources to the marketing and sales efforts every day.
- How Do We Effectively Position our ETF /Firm?
A strategic positioning plan is critical for long term success. Answering the Who, What, Why and How questions are important to identify your targeted channels and plan market engagements effectively.
- WHO are the competitor funds and HOW do you compare/contrast to those products/firms?
- WHO are your targeted channels and WHEN/HOW do you engage that audience?
- WHY should investors select your fund/firm?
- WHAT does your fund solve/position the investor for, and WHAT does it replace in their existing portfolio?
Investors are buying the manager and firm, as much as the strategy, so being viewed as a consultant/thought leader that investors seek for solutions is vital for attracting long term investors. Passion, professionalism, persistence, and patience go a long way.
With over 3 decades of fund organization, accounting, administration, and management experience across a variety of investment structures, Nottingham is uniquely equipped to handle your needs. We are at the forefront of the ETF movement, having both passive and active ETF relief. Our Spinnaker ETF Series Trust and an affiliate advisor are white label issuers offering both the Blue Tractor Shielded Alpha and the New York Stock Exchange AMS semi-transparent ETF wrappers for actively managed funds, giving our advisor partners flexible and ready solutions for their ETF endeavors. Nottingham is well versed in the ETF ecosystem and has the expertise, relationships, services, and technology to help navigate the launch/operation of your ETF product.