Q&A WITH EXCHANGE TRADED CONCEPTS

This week we sit down with Garrett Stevens at Exchange Traded Concepts to discuss the company’s active ETF platform and how the active ETF market is evolving.

Exchange Traded Concepts (ETC) is an ETF platform provider that provides asset managers a turnkey solution as they look to enter the ETF market. For those who are unfamiliar, what services do you provide as an ETF platform provider?

When we talk about being a “turnkey” ETF platform, we really mean it. We handle everything that is required to launch and operate an ETF. We have everything from in-house legal counsel and compliance to an in-house marketing team of website and graphic designers, who create custom websites and marketing materials for our clients, and a digital marketing solution to help clients raise awareness and, hopefully, assets for their funds. ETC also has an experienced team of portfolio managers on our trading desk in NYC to facilitate day-to-day trading operations. Our team of 22 people has deep experience in the ETF industry going back to the very first ETF ever launched in 1993. ETC is the global pioneer in white label ETFs and is the largest white label firm in the world. We currently have 44 funds on our platform including active, passive, fixed income, fund of funds and commodity funds with over $9 billion in AUM.

Recently, ETC has supported several actively managed asset managers launching new ETF businesses. What, if any, additional considerations should a firm have as it works through market entry?

ETC currently has 23 actively managed funds that we have launched for our clients. The number of new active entrants continues to expand all the time. The ETF wrapper has many benefits for active asset managers and their clients. The ability of actively managed ETFs to utilize custom, in-kind baskets for creations and redemptions when making changes to the fund’s portfolio makes significant tax efficiency possible. Operational efficiencies are another big benefit to managers that are considering the ETF wrapper for the strategy. Being able to manage one ETF portfolio rather than hundreds of individual accounts streamlines the administrative process as well.

Before there were mutual fund to ETF conversions, there were SMA to ETF conversions. ETC has assisted on a number of these conversions. What is unique about this process?

ETC has assisted a number of registered investment advisers with the process of converting their SMAs into white labeled ETFs. The ETF provides significant operational efficiencies for RIAs and can offer meaningful tax advantages for clients whose SMAs are converted into ETFs. It is important to work with experienced partners that can help navigate the complicated legal and operational issues associated with these conversions.

Active ETFs are headed for another record-breaking year. Based on your role and client conversations, what needs to happen for the industry to continue to grow?

We believe the active ETF industry will continue to grow in terms of new products, new entrants and assets. As more and more managers outside the ETF industry learn about the ability to create their own funds by either moving an existing strategy into an ETF wrapper or bringing a different strategy to market, interest in the space will continue to grow as investors gain access to new and different products. This growth in the industry will continue to serve investors by keeping fees competitive, investor choice high and adding more options for investors to build portfolios that meet their needs.

Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?

When considering an ETF launch, the way you choose to launch it may make all the difference in the success of the new fund. The time spent designing its strategy, the fund’s operations and how the fund will be positioned in the marketplace will be time well spent prior to the actual launch. The partners you choose to work with can bring tremendous value to the whole process and to the end result. The NYSE has been instrumental to our clients and their funds in areas ranging from marketing, to capital markets issues, to regulatory insight.

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 12/3/2021

*Simple average

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 12/3/2021

*Simple average

Source: Factset as of 12/3/2021