Presented by Syntax Advisors.
Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, insurers and investment and regulatory cover and joining me today is Roy Leckie, director at Walter Scott & Partners, and Deborah Fuhr.
Welcome, Roy and Debbie.
Roy Leckie: Thank you very much, glad to be here.
Deborah Fuhr: Thank you.
Margareta Hricova: Roy, can you tell us about Walter Scott & Partners Investment Management and your role?
Roy Leckie: Walter Scott was founded with the express ambition of really being considered amongst the very best, long only, global equity managers in the world. We’re based in Edinburgh and we have a client base in over 20 countries, with the significant majority in the US and Canada.
We’ve got one investment team, one investment philosophy, and our values as a business are really encapsulated in this concept of longevity. So longevity with the team, and I’m a good example of that – I’ve been with the firm for 26 years. Longevity with our client base, and that’s what the focus goes into; keeping hold of our clients, delivering performance and an excellent client service function and getting the operational component of the relationship right.
We believe investing is a long term undertaking and our investment philosophy is really aligned to protecting and growing client assets over the long term.
Deborah Fuhr: What is the strategy for the new, actively managed BNY Mellon Concentrated International ETF you listed last week on the New York Stock Exchange?
Roy Leckie: It’s what we call a concentrated EAFE strategy with EAFE standing for Europe, Australasia and the Far East, so it’s really developed world, not counting US, that’s the universe we will be stock-picking from.
Our research team is charged with identifying high quality growth stocks so leaders in their field, companies with comparative advantages that are really difficult to replicate, sound financial structures, the best standards of ESG and hopefully we’re not paying too much for them.
So a good example would be a Japanese business called Keyence. So Keyence is a world leader in sensor productions particularly used in factory automation. They’ve got incredibly strong margin structure, excellent distribution and route to market, an incredible financial resilience and a long term growth profile that is likely to see it continue to dominate what is itself a very rapidly growing market.
Margareta Hricova: And why have you decided to create an ETF now?
Roy Leckie: Walter Scott’s always taken a very kind of considered and deliberate approach to growing its business, growing our client base and our strategies and our vehicles. We’ve worked very closely with BNY Mellon on this opportunity, and we think now is the right time to list in the US.
For quite a while now, US SABR, US asset owners have been biasing very much to their domestic market, and I think with some justification; the US market performed really very well, relative to other places, obviously. We now think that is running out of steam, so the US out-performance, if you like, is coming to an end, and US markets, as we know, are becoming increasingly narrowly led.
So now we think is the right time for US SABR to be thinking about increasing their exposure to overseas markets. They should be trying to identify the very best of what’s available in Europe and Japan and the Far East, and I think this concentrated EAFE vehicle will serve that ambition well.
Margareta Hricova: And who do you expect to use the ETF and how will they use it?
Roy Leckie: The vehicle wasn’t designed for a specific market segment. I think the tax efficiency will see it being popular amongst the intermediary markets, so financial advisors and such like. But we are hoping through time it will become attractive to both a broad gamut of institutional and retail savers.
Deborah Fuhr: Do you expect that you’ll launch any further ETFs in the future?
Roy Leckie: No intentions in the short term. We will remain open minded to it, but no specific plans on the table at the moment, Deborah.
Deborah Fuhr: Well, that’s great. It’s nice to catch up with you. I do remember meeting you in your castle back in the day, so great to see you again.
Roy Leckie: Thanks very much. Delighted to join you.
Margareta Hricova: So Debbie, can you tell us about some of the other news in the ETF industry?
Deborah Fuhr: Last week, there were 38 new listings from 20 issuers and there were 59 new cross-listings.
This has been a record year in terms of new listings. We’ve seen 1652. And in terms of closures, 1037. So net, we have 615 new ETFs globally.
Last week, our launch day transparency ETF, and we have also seen that Global X has issued a number of thematic ETFs in Japan, in London and in Hong Kong, so really increasing that global offering of thematics, which has been a trend globally for many issuers. Invesco listed some ESG products. WisdomTree has done commodities, so we’re seeing many similar trends in terms of ESG and thematics.
I think the big news is if we look at the end of November data, the ETF industry now has gathered $1.14 Trillion in net inflows, so this is creations vs redemptions. That is an all-time record, and we’re only at the end of the 11th month.
All of last year, net inflows were 763 billion, so we are nearly 400 billion above where we were all of last year. So that’s very significant. The assets have declined slightly, given the market has pulled back slightly based on concerns around the new COVID variant, but we’re very close to $10 trillion.
At the beginning of the year, I joked with one of the journalists that I felt that the industry would be at 10 trillion and have over a trillion dollars of net inflows, and he was very skeptical. But I’m hopeful my forecasts will be accurate at the end.
So we’ve had 30 months of consecutive net inflows, many first and positives in the ETF industry, and I do think it continues to be a vehicle that is used by many types of investors all over the world.
Thanks so much, Debbie, and thank you to our sponsors Syntax Advisors, to Roy and of course, to all of you for watching.
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