Investor demand for exchange-traded funds shows no signs of slowing, and companies without ETF offerings could risk losing business, according to a Goldman Sachs expert.
Steve Sachs, global chief operating officer of Goldman’s ETF Accelerator, points out that despite the time and resources required to launch an ETF, not offering current and new investment strategies as ETFs could prove even more costly.
“Many of our customers would tell you that the opportunity cost is wrong [offering ETF products] is bigger,” he recently told CNBC’s “ETF Edge.”
If a company doesn’t offer ETF offerings, Sachs expects that “those assets will eventually migrate and go to a competitor that does.”
To help customers launch their own ETF products, Goldman Sachs has developed its ETF Accelerator, a digital platform that helps clients launch, list and manage their own ETF products. The accelerator was launched in 2022 in response to what Sachs described as significant customer demand.
“Our key institutional clients were calling and asking, ‘How do we get into this ETF space? How do we deliver our active and other strategy in an ETF shell?’” he said.
According to Sachs, client requests to launch ETFs increased following the passage of SEC Rule 6c-11 in 2019, which was intended to launch these funds more efficiently.
“While we wouldn’t call it a major boom, it was definitely a catalyst. The idea was that it made it easier to launch an ETF, but it didn’t make it easier,” Sachs said. “At one point we had more than 41 customers calling us with the exact same problem: ‘How do I do this, how do I do it? I’ll hurry up and can you help us?’”
It could take years to build the expertise, headcount and risk management framework needed to launch an ETF, said Sachs. Goldman’s accelerator platform is here to help.
“[It] allows our clients to launch, list and manage their own ETF – but do so using the technology, infrastructure and risk management expertise Goldman is known for, and essentially get to market faster and more cost-effectively than they can could alone. Sachs said.
Since its launch, the accelerator has enabled the launch of five ETFs. The most recent is Eagle Capital Management’s Select Equity ETF (EAGL), which listed last week.
Other ETFs launched through the accelerator include GMO’s US Quality ETF (QLTY) and three Brandes Investment Partners funds: the Brandes Small-Mid Cap Value ETF (BSMC), the US Value ETF (BUSA) and the International ETF ( BINV).
“GMO, Brandes [and] “Eagle Capital all felt that the journey of building it ourselves would be too expensive and too long,” Sachs said. “They didn’t want to miss out on the opportunity costs of not executing their investment strategies in the package.”
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2024-04-01 22:46:23
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