Along with technology (32 percent), the fund’s other major sectors include health care (29 percent) telecommunications (12 percent) and industrials (11 percent). Financials make up 5 percent.

“This fund exceeded my expectations,” says Edelman, who notes he didn’t play any role in the ETF’s creation other than providing some guidance to Morningstar about the basic concept for his idea. “I was impressed with Morningstar’s index construction, and they went in a few directions I never thought of––one being financial services innovation as one of the nine themes, which hadn’t occurred to me.”

Both Edelman and BlackRock stress that neither he nor his firm are being compensated in connection with the XT fund or its index.

“We simply are an investor in the fund on behalf of our clients,” he says, adding that he likes the fund as a diversified, low-cost way to gain exposure to potentially transformative companies. The fund’s expense ratio is 0.47 percent.

Edelman notes that of the 198 securities currently in the fund, about 140 of them are stocks that weren’t previously in his clients’ portfolios.

The fund’s top holding is Pharmacyclics, a biopharmaceutical company focused on treatments for cancer and immune-mediated inflammatory diseases. Familiar names within the top 10 holdings include First Solar, Valient Pharmaceuticals, Sunpower and Netflix.

For BlackRock, the XT fund added a new wrinkle in its ETF development process.

“It’s not unusual for us to take client input into consideration when building new products, but what’s unique in this case is it’s the first we’ve done so with a registered investment advisor,” says Hollie Fagan, head of BlackRock’s dedicated RIA business. “In the past, a lot of our client-led innovation with respect to iShares came through institutional investors. Because of the deep relationship we’ve built with Ric over the years, when he couldn’t find a product in the investment universe that met what he envisioned, he had the confidence to make iShares his first call.”

She adds that part of the appeal of working with Edelman on the XT fund is his success in working with mass affluent clients. “That’s a different business model from most RIAs, and one we think we can learn from in terms of our messaging to the end investor,” Fagan says.

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