ETF industry gets its own ETF!

Apr 20th, 2017 | By | Category: Equities

US-based asset manager Toroso Investments and white label exchange-traded fund platform Exchange Traded Concepts, have launched the ETF Industry Exposure & Financial Services ETF (NYSE: TETF). The fund provides investors with access to companies driving and participating in the growth of the ETF industry.

Mike Venuto, CIO of Toroso Investments

Mike Venuto, CIO of Toroso Investments.

TETF tracks the Toroso ETF Industry Index, which is designed to provide exposure to the publicly traded companies that derive revenue from the ETF industry, including ETF sponsors, index and data companies, trading and custody providers, liquidity providers and exchanges.

“Clearly, investors and advisors now understand the benefits of the ETF structure, including improved liquidity, tax efficiency, and increased transparency,” said Mike Venuto, CIO of Toroso Investments. “But while they’ve been able to incorporate those benefits into their portfolios, they have not had opportunities to participate in the growth of the ETF industry itself. That is an issue we’ve solved with the launch of the Toroso ETF Industry Index and TETF.”

“The ETF industry is more than just a list of fund sponsors, and this index is designed to include the full range of participants,” continued Venuto. “It is also aimed toward capturing not only the established leaders in each area, but also those firms that might be new to the space but which are bringing exciting approaches that could resonate with investors and drive further growth of the industry itself.”

The fund will seek to tap into the substantial growth experienced within the industry in recent years – over the past five years, ETF assets under management have grown in the US from $1.2 trillion to $2.7tn and the number of US ETF sponsors has increased from 45 to 78.

The index, maintained by Solactive, is designed with four tiers of constituents:

  • Tier 1 accounts for 50% of the index’s exposure and is made up of companies with substantial participation in the ETF industry, providing direct financial impact to shareholders, including BlackRock, Charles Schwab, Invesco, State Street, WisdomTree, and more.
  • Tier 2 accounts for 25% of the index’s exposure and is made up of companies with substantial participation in the ETF industry, providing indirect financial impact to shareholders, including KCG Holdings, NASDAQ, Intercontinental Exchange, and more.
  • Tier 3 accounts for 15% of the index’s exposure and is made up of companies with moderate levels of participation in industry, including Bank of New York Mellon, US Bancorp, FactSet, Ameriprise Financial, and more.
  • Tier 4 accounts for 10% of the index’s exposure and is made up of companies that are new or participating in a smaller way in the ETF industry relative to their overall focus, including Morningstar, Eaton Vance, Goldman Sachs, Legg Mason, Citigroup, and more.

Constituents within each tier are equal-weighted. There are 37 securities across the entire ETF with the largest holdings being CBOE, Invesco and MSCI with 6.4% each, followed by S&P Global, BlackRock, State Street, Charles Schwab and WisdomTree which each hold an approximate 6% weighting.

The index is overseen by a committee made up of industry veterans, including Mike Venuto; Guillermo Trias, CEO of Toroso Investments; Linda Zhang, Founder of Purview Investments; Kris Monaco, Founder of Level ETF Ventures; and Kevin Carter, Founder of Big Tree Capital. Collectively, the committee has decades of ETF industry experience covering a range of functions including index creation, ETF portfolio construction, investment management, distribution, research, trading and more.

“Not only are we seeking to capture the performance of the industry, but we’re also looking to bring together many of its leaders to leverage their authority as we monitor, research, and benchmark the category’s potential future growth,” said Trias, who created the concept and the idea behind the ETF.

“We have deep roots in the ETF ecosystem and have created an index that captures the dynamism of ETFs and the disruptive innovation they have brought to the financial services industry,” added Venuto.

The ETF has an annual cost of 0.64%.

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