Given the highly specialized nature of ETFs, newcomers eyeing the ETF space, including those who manage mutual fund or SMA offerings, might face a challenging task when it comes to launching and managing an ETF
Building an ETF, let alone a family of ETFs, from the ground up is an incredibly complex process that requires numerous teams to work in harmony to avoid unexpected delays and unnecessary expenses.
Though not an exhaustive inventory, this preliminary rundown spotlights vital pieces involved in the creation process of an ETF:
Legal & Regulatory
Contracts, compliance, fund trust structures, independent board oversight, regulatory filings and more must all be handled deftly from the fund idea stage and beyond.
Capital Markets
Vetting potential exchange partners, managing the exchange listing process, upholding relationships with Authorized Participants and Lead Market Makers to support ongoing liquidity of the fund.
Portfolio Management
The trading and portfolio management services that include pre-trade compliance, portfolio optimization and/or replication, basket creation, tax efficiencies, and rebalancing.
Board & Trust
Provide the essential oversight needed of the fund and fund family.
Marketing
A multi-channel approach involving branding, content, public relations, digital marketing, and social media is a must for helping a fund stand out (also a must: maintaining regulatory compliance).
Website & Compliance
Fund website development and maintenance services that adhere to specific and prompt regulatory compliance criteria related to transparency, disclosures, and ease of access must be available each trading day.
Fund Services
The day-to-day administration, fund custody, distribution, accounting, reporting, and more that requires highly specialized expertise.
Building and running an ETF relies heavily on deep industry experience. That level of complexity can be daunting for potential new entrants to the ETF space, even those that may have already built robust mutual fund or SMA lineups, given the highly specialized nature of ETFs.
At ETC, we pride ourselves on being able to bring together all of the various job functions above, as well as many others, to build bespoke strategies, products, and structures that serve as the foundation for ETF growth. With the right partner, all of this complexity becomes interconnectedness and the path forward to filing, launch, and beyond becomes that much clearer.
ETC works with firms of all sizes to develop and implement innovative strategies, contact us today to talk all things ETFs.
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.