Distribution strategy - Distribution is about more than just salespeople and sales materials. It has evolved into a holistic approach incorporating integrated marketing, media, digital strategy and understanding the use of technology and data.
Hortz: Any words of advice you can offer asset managers with ETFs or thinking about launching an ETF?
DeSignore: There are several considerations that I would put at the top of the list. This is by no means exhaustive, but just some of what an asset manager should think about in making the decision:
Who are your buyers? Can you access those buyers? Are you relying on particular wealth management platforms that may or may not approve your ETF for use given their onboarding requirements?
How are you raising your first $50 million? This goes hand in hand with the first consideration. A detailed, holistic distribution strategy is critical – this is not just sales personnel, but marketing, PR, media, digital presence, and technology stack.
If you are an existing asset manager, will your current sales team support the ETF, or will you hire ETF Specialists?
I do not like to lean on performance, given it will inevitably ebb and flow, but frankly that is a key reason why investors buy active products. If the strategy is not gathering assets in a different structure (SMA, mutual fund), for whatever reason, just putting it in the ETF wrapper is unlikely to change the tide.
As to the competitive landscape, what ETFs are currently available in your asset class and at what cost? What is your differentiator versus those products? You must also consider that you have to bring something beyond just your product to the table for advisors – think research, content, etc.
You need to create scale across all aspects of a distribution strategy to compete. I believe that is one reason that FLX has become such an important partner to ETF issuers and all asset managers. We have helped to create scale to support all aspects of an ETF business strategy, whether a new or established issuer. Specifically, we bring top tier resources at competitive prices through shared resources that assist from product ideation, to creation, operations, and distribution. Concurrently, we are creating a community through the gravitational pull of intriguing investment solutions and insightful content, bringing together asset managers directly with advisors and wealth managers.
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