If the reception area at a company's headquarters is any reflection of its personality, then Global X Funds has got the right look. Behind the front desk at its Midtown Manhattan office is a bright orange wall festooned with the company's logo. The wall's eye-grabbing hue makes a statement this is a company that isn't afraid to strum its own beat.
Indeed, Global X has made a colorful splash during its four-year existence by eschewing cookie-cutter exchange-traded funds and instead rolling out niche--if not bold--funds that take investors deep into the nooks and crannies of the investing landscape.
Among them have been funds focused on lithium, fishing, fertilizers and social media. And last year, in the depths of the euro crisis, came the gutsy call to launch a stand-alone Greece ETF. Many of its funds have caught on; others haven't. "They're willing to be the first one out there and put themselves out on a limb," says Morningstar ETF analyst Robert Goldsborough. "They've prided themselves in rounding out the ETF universe by going places they think they can add value with a product."
Such intrepidness has garnered Global X industry awards naming it the most innovative company in the space. While Global X relishes that image, it doesn't travel less-trodden paths just to be different. Each fund idea--they have 35 current ETFs and more than 50 others have been filed with the Securities and Exchange Commission--goes through an intensive vetting process to ensure it meets two key criteria: It passes muster as a long-term trend, and there's nothing else like it on the market.
"We're an interesting company, but I think the industry has a hard time classifying us," says Global X's 36-year-old CEO, Bruno del Ama. "A lot of good ideas that make sense in the markets have already been done, so we won't compete in those spaces. Whatever we do has to be unique and differentiated, so we do a lot of products that are considered to be narrow niches because they're new and innovative."
The bulk of Global X's funds are sold through the RIA and broker-dealer channels, as well as through direct sales to retail investors. A smaller proportion goes to institutional clients such as hedge funds, pension funds and endowments.
But competition for assets is fierce in the ever-growing $1.2 trillion exchange-traded product industry, and the plethora of new funds means more choices for investors. For Global X, whose $1.2 billion in assets under management made it the 20th-largest provider of U.S.-listed ETFs as of June 30 (according to the ETF Industry Association), its challenge going forward is broadening its product lineup and showing investors that it has more to offer than just a passel of quirky funds.
Global X takes a passively managed, index-based approach that aims to capitalize on long-term secular trends that will help shape the world over the next 10 years. Those major trends include the rise of the consumer class in emerging market countries, as well as the accompanying demand for commodities, energy and agriculture-related businesses. That's reflected in Global X's product line, which is heavily tilted toward emerging market and commodity-related themes. The expense ratios of the company's ETFs range from 0.45% to 1.14%, with the majority being in 50- to 70-basis-point range.
In the commodity space, the Global X Silver Miners ETF (SIL) and Global X Uranium ETF (URA) offerings are among its largest funds ($277 million and $143 million in assets as of mid August, respectively). In the emerging markets arena, it has sliced and diced the China market with five separate funds ranging in asset size from the Global X China Consumer ETF (CHIQ), with $107 million in assets, to the Global X China Materials ETF (CHIM), with just $2.2 million in assets.
It also offers three Brazil-focused funds, the largest being the Global X Brazil Consumer ETF (BRAQ) with $25 million in assets. Another large component of Global X's product line are "access-type" funds that tap into specific markets that investors might otherwise have difficulty playing. The Global X Lithium ETF (LIT) and Global X Social Media Index ETF (SOCL) are examples of two narrow areas where it sees long-term growth opportunities.