ETC’s PM team has developed proprietary systems for portfolio trade modeling and analysis, workflow automation, and customized performance and post-trade reporting for clients.
The daily activities of ETF portfolio managers can vary depending on whether the fund being launched or managed is an Index or Active ETF. One thing that remains the same is the importance of engineering in the portfolio management process. ETC’s Portfolio Management team aligns all the moving pieces involving the exchange, the regulators, fund administration, the AP/lead market maker, etc.
The PM team uses python-based code and open-source tools for their trade and data management systems. These platforms allow for agile development and quick integration with new service providers and client systems. Some of the features have been developed to improve operational efficiency and simplify trading workflow, as we describe below in more detail.
ETF Rebalance
Index ETFs have a specific set of rules and time frames that portfolio managers follow since they rebalance on a set schedule. For Active ETFs, portfolio managers rebalance with instructions from a specific investment adviser on an ad-hoc basis. With the differing rebalancing time frames between Index and Active ETFs, having the technology to simplify creation-redemption basket workflow is essential.
Data Management
Portfolio managers are systematically monitoring thousands of securities, tracking and pricing the portfolios, and providing daily analysis of corporate actions, cash management, and accounting breaks. ETC’s platform is engineered to handle large amounts of data by integrating third-party, open source and proprietary solutions for analysis, data handling, and workflow automation.
Order Modeling
Once the rebalance is received by the portfolio managers, the basket is reviewed for gains and losses that may be realized. This is where tax advantages of the ETF structure over SMAs and mutual funds fits into the mix. Engineering empowers portfolio managers to quickly review tax lots, executing trades and redemption baskets efficiently with a trading workflow that has been tailored to the ETF creation/redemption process.
Reporting
Engineering automates compliance testing, review of diversification such as IRS RIC requirements, and produces reports confirming breaks, corporate actions, and index deletions or changes. The direct integration with service providers allows for custom performance analysis and enhanced post-trade reporting and timely tracking error attribution reports.
Ultimately, engineering is critical to the portfolio management process because it supports growth, cost reduction, and business continuity. While having the technology and automation in place creates a transparent and seamless process, it’s important to have a team with deep trading and asset management experience to sustain the platform.
If you’re looking for a way to simplify your business model, contact us to learn more about ETC’s portfolio management services.
Important Disclosures
Exchange Traded Concepts is an SEC Registered Investment Adviser. The Firm's Form ADV is publicly available and can be found here: https://www.adviserinfo.sec.gov/Firm/151197. ETC may be subject to various conflicts of interest in the provision of its services. Potential conflicts of interest shall be identified in the Firm's Form ADV. The Exchange Traded Funds are referred to as "Funds" for purposes of this document. ETC transacts business in the United States and other jurisdictions where it is properly registered or excluded or exempted from registration requirements. This document does not constitute an offer of services in jurisdictions where ETC does not have the necessary licenses.
No representation is made that any Fund's investment process, objectives, goals or risk management techniques will or are likely to be achieved or be successful or that any Fund or any underlying investment will make any profit or will not sustain losses. The risks of investing in a Fund will not be negated by ETC's Fund services, and no assurance is given that a Fund will not be exposed to risks of significant trading losses.
The information provided herein does not constitute tax, legal or accounting advice. ETC does not provide legal, financial, accounting or tax advice. Clients and prospective Clients, as well as investors and prospective investors in a Fund ("Investors") are advised to seek the counsel of their own legal, financial and tax advisors for all matters relating to the services and structures contemplated herein. Each Investor (either alone or with its professional advisors) is solely responsible for its own due diligence, risk assessment and tolerance, investment objectives, any decision to invest in a Fund, and for monitoring its investment for purposes of determining whether it wishes to remain invested in such product and whether such product continues to be appropriate for its circumstances and requirements.
The information provided herein: (a) is provided as of the date indicated, (b) is in summary only and is not complete, and (c) is subject to change at any time without notice. Certain information provided by ETC is based on third-party sources and, although generally believed to be reliable, has not been independently verified. ETC is not responsible for errors or omissions from these sources. No representation is made with respect to the accuracy, completeness, or timeliness of such information, and ETC assumes no obligation to update or otherwise revise such information. In no event will ETC be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with the use of the information contained herein, even if advised of the possibility of such damages. ETC and its respective employees and its affiliates hereby exclude, to the extent permitted by applicable law, all liability in connection with the use of the information herein.
Interests in Funds will not be insured by the FDIC, the SIPC or any other organization, will not be deposits of any bank, and are not guaranteed by any bank.