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.

Targeted Focus
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.

"We like the lithium market because of how it's tied into the energy market, electric vehicles, as well as iPhones, iPads and the like," del Ama says. LIT, which launched two summers ago, recently had nearly $75 million in assets. It tracks the Solactive Global Lithium Index that comprises 19 companies that either explore and/or mine lithium, or are involved in making lithium batteries.

SOCL, which launched last November, recently had $14 million in assets. The fund tracks the Solactive Social Networks Index that comprises 11 companies--including Facebook and LinkedIn--whose main business is tied to social networks.

"Given notions left over from the dot-com bubble and some of the real issues facing some of those [social media] companies today, it's an easy industry to criticize," del Ama says. "But we think we're early on in an industry with a lot of growth potential, and that we're getting into it at the right time."

Sri Lanka And Other Ideas
Before del Ama co-founded Global X in 2008, the Spain native and Wharton School grad was head of operations in the structured products business at Radian Asset Assurance. The company's other co-founder, current chief operating officer Jose Gonzalez, 35, is a fellow Spaniard who also currently serves as president of GWM Group Inc., a New York City-based broker-dealer.

The two friends initially wanted to start an investment firm focused on structured products, Gonzalez says, but ultimately concluded that the liquidity, transparency, diversification and low fees of ETFs were a better option for clients.

Global X's first product, the FTSE Colombia 20 ETF (GXG), was launched in February 2009 and has been one of its biggest hits both in terms of assets ($158 million) and performance (the share price has nearly tripled since inception).

The Global X team finds roughly 60% of its fund ideas through weekly research meetings and biweekly meetings where they discuss general trends from around the world. Another 30% of fund ideas come from clients. "Many [of these ideas] are tactical, but some can fit into our long-term strategies," del Ama notes, adding that another 10% of fund ideas are pitched by index providers or come from people they know at hedge funds.

From there, Global X puts together a laundry list of ideas they've vetted to see if they pass the twin filters of being both a sustainable long-term trend and unique to the market. Then they ask whether it can attract enough assets over the medium and long term to sustain the product. "That's a process we go through with the sales team," del Ama says.

"The combination of how much we like an idea as a long-term trend and how big the asset potential is determines the priority of what goes next," he adds.

Product rollout depends on market conditions. For example, Global X last summer announced it filed for five ETFs with the SEC that targeted specialized corners of the economy: toll roads and ports; railroads; farmland and timberland; cement; and advanced materials, which entails companies that use cutting-edge technology to make enhanced versions of traditional materials used to make various products. 

Global X still likes these funds, del Ama says, but they won't launch them until market conditions improve. Elsewhere in its pipeline, Global X has filed for a Sri Lanka-focused ETF even though it knows the idea isn't ready for prime time.
"As a capital market, Sri Lanka isn't substantively ready," del Ama says. "But when you look at the long-term trends, we believe Sri Lanka will be a much bigger economy with a more developed capital market."

He notes the country is already privatizing some industries, but that the process will probably take a couple of years. "We're ready to go [with a Sri Lanka ETF]," del Ama says. "We've put the seed out there. Their market may never reach the point where we think it will, but we've created the groundwork on the regulatory side."

Broader Appeal
Global X's ideas don't always pan out. Several of its existing funds have very low trading volume, and earlier this year it closed eight ETFs that failed to attract sufficient assets. These included funds that targeted the farming, fishing, food and waste management industries. 

"For a product manufacturer who's gone through the process of understanding the dynamics and sizing of a market, to close a fund because there's little interest is painful," del Ama says. "But you have to put it through the filter of investors not wanting the product."

Todd Rosenbluth, an ETF analyst at S&P Capital IQ, notes that it's hard to keep small ETFs alive for long periods of time, especially for a smaller company such as Global X that lacks a bevy of super-large ETFs that can help offset struggling funds.
But Rosenbluth offers that Global X appeals to a certain segment of investors. "It's a niche player and it serves a need for investors looking for targeted asset allocation," he says.

S&P Capital IQ uses a bottom-up approach to rating ETFs based on analyzing a fund's individual holdings, and it reserves its top "overweight" ranking for ETFs with holdings that combine attractive valuations and modest risk. It has overweight ratings on Global X's FTSE Norway 30 ETF (NORW) and China Financials ETF (CHIX) products.

Regarding Global X's "niche" reputation, del Ama says the company has started to move beyond that during the past year by rolling out products aimed at appealing to a broader audience. These include two dividend-focused ETFs--the Global X SuperDividend ETF (SDIV) and the Global X MLP ETF (MLPA). It also includes the Permanent ETF (PERM), a multi-asset class portfolio with 25% stakes in each of four different asset categories, as well as the Global X Top Guru Holdings Index ETF (GURU), which is described as using a proprietary system to compile the highest-conviction ideas from a select pool of hedge funds based on Form 13F filings.

"In essence, [GURU is] a substitute for the S&P 500 in a portfolio," del Ama says.

Most recently, the company in July launched the Global X SuperIncome Preferred ETF (SPFF) that tracks an index of North American preferred securities (the yield on the underlying index was recently about 7.5%). With its income-oriented products, the company is facing more existing competition than it is with, say, its Global X Fertilizers/Potash ETF (SOIL).

It's All Greek To Me
Despite efforts to broaden its appeal, many investors still know Global X for its niche products, such as the Global X FTSE Greece 20 ETF (GREK) that launched last December. "We understand we took some reputational risk by putting it out there and that it doesn't fit within the broader brand we want to create," del Ama says. "That said, there's something to be said about Greece."

He says Global X thoroughly studied the pros and cons of the Greek market, including the potential fallout if it leaves the euro zone. But he notes the fund's underlying index has a number of top-shelf companies with global operations--some of which are difficult for investors to buy individually--that can be purchased for a song. "Investing in Greece right now is almost like buying a call option that's way out of the money," del Ama says. "We're confident some of the names will survive [whether or not Greece leaves the euro]."

Adds Jose Gonzalez, "Everyone has an opinion about Greece now, even if it's mostly negative. And an ETF is a great way to express that opinion because people can either go long or short the product."

And providing that kind of access, del Ama says, is why Global X sometimes goes where others fear to tread. "Our job is to create the best access to these areas and to democratize them for investors."