Dan Barnes: Welcome to ETF TV News – Your update on newly issued exchange traded funds and products. I’m Dan Barnes. Joining me this week is Rory Riggs, CEO of Syntax, which launched the Syntax Stratified US Total Market ETF last week. And of course, Deborah Fuhr from ETFGI. Deborah, let me start with you. Welcome back to the show.
Deborah Fuhr: Thank you.
Dan Barnes: Can you give us an update on the securities we saw issued over the previous week?
Deborah Fuhr: Sure. Last week was a very busy week. We saw 48 new ETFs and ETPs being listed by 16 issuers. They were on 11 exchanges. 45 were focused on equity exposure, three were fixed-income. We saw a number of ESG, we saw thematics, we saw active and we also saw smart beta. Smart beta is an area where I think there’s been less interest, but at the end of February, we saw that assets reached a record of 1.05 trillion and we have record net inflows year-to-date of 29 billion, so it’s clearly an area where we’re still seeing flows and interest from investors.
Dan Barnes: And then Rory, let me turn to you, first of all, welcome to the show.
Rory Riggs: Thanks for having me on the show.
Dan Barnes: So this is your fourth ETF and it was listed with 21 million in seed capital, all of you ETFs have been using the Syntax Stratified Weight Index. Can you tell us what a Stratified Weight Index is?
Rory Riggs: It’s our core-patented methodology and we’re going after an investors’ core assets. Your core assets is where you take the major benchmarks, but the way you get them from the major benchmark providers is not perfect. I mean, it’s always overweight, the stocks that are high in momentum. If you’re an equal weight or go with stocks, there are too many of, the easiest way to look at is to look at the cap rate.
Now you’re overweight technology for 45% of your portfolio. And then you look at the small cap. It’s underweight technology and overweight oils, so no matter which universe you’re looking at, you’ve got this imbalance. And so this ETF, we just launched the Stratified S&P 1500, which contains a stratified 500, a stratified 400, and a stratified 600, all of them with one goal; to get your economic balance within those portfolios, so when you wake up every day, you know what you are.
Deborah Fuhr: There’s been a lot of discussion recently about mutual funds converting into ETFs. We know that’s going to be happening soon. Rory, you were the first to convert private funds into ETFs with track record and assets. Can you talk about why and how you decided to do that, please?
Rory Riggs: So we’ve been managing separately managed accounts with our strategy, Stratified with S&P 500. And one of the great things about ETFs is for the tax benefits, you get an ETF strategy. And we realized we could roll over our track record if we contributed the shares themselves into the ETF. And so we’re the first people to show up opposing the shares, because you needed that continuity of interest. But it also taught us that we could take shares and separately managed accounts and move them at a tax-deferred basis into an ETF.
And this is a really big idea because many people, in their core assets, they’ve only asked me if I wanted it for ten years, and they have an unweighted security and it’s hard to get out because of tax friction. And this gives people an idea to be able to move those assets into an ETF and get a diversified portfolio, and so we’re going to start doing all of our savings this way, and we find this a really attractive option for investors.
Deborah Fuhr: So basically it works for mutual funds, private funds and SMAs, and all of them are based on what you define as stratified weighted indices, which are really looking at related business risk. What do you envision doing going forward? What are your future plans?
Rory Riggs: Everything we do is going to be your universe, but diversified business for us. And we don’t do it at one level, we do it at multiple levels. In the emerging markets there’s too many banks, but there’s also two big ones, and so just leaving a bank portfolio doesn’t work. You need to try it for each sector, too. So we’re going to do a series. We will run stratified versions of every major index; IFA, emerging markets, Russell 1000, and we intend to launch all those as ETFs, and then let investors have a chance to fix their core portfolios, which for now have whatever running solutions they took, and change it and move it into our portfolio. And I think the next one we’re going to see will be in this quarter.
We’re going to do the same one, the SY Total US hedge. It’s very common you do your hedges around it, which we think will be really attractive in this market space, because you get the benefits of stratification, you don’t have any one sector overweighting, and if the market does adjust you’re protected. And we expect to that in a rollover transaction.
Deborah Fuhr: A lot of people aren’t familiar with the fact that you were first to do these conversions and I was not really familiar with your strategy, so thank you for sharing that update with us, that’s great.
Rory Riggs: Thanks Debbie for having me. I appreciate it.
Dan Barnes: Debbie, turning back to you. Can you give us a bit more color around some of the ETFs and ETPs we saw launched over the previous week?
Deborah Fuhr: When we look at what’s come to market, there has been a trend to launch single security, leveraged and inverse products in London. In Chile, they were able to do the fastest listing of a Bitcoin ETF based on a level of understanding between Chile and Canada. They were able, without any additional regulatory oversight, to list that product or crosslist it in Chile. We also know now that Brazil is looking at listing an ETF from a local issuer, so Bitcoin continues to be another area where we see interest.
And I think some of the interesting trends is we’ve talked a lot about active ESG thematics. If we look at the end of February, active ETFs have reached a record of 318 billion, net inflows are a record 34 billion year-to-date, ESG is at a record 227 billion with year-to-date inflows of a record 41 billion. And thematic ETFs, which has really been a hot topic recently, there’s 394 billion in assets and 43 billion of year-to-date inflows which are both records, so areas of focus are continuing to do well from an investor flow and asset point of view.
Dan Barnes: That’s great Debbie, thank you very much.
Deborah Fuhr: Thank you.