Most new exchange-traded funds are ideas looking for assets. Two new ETFs created under the auspices of Ronald Blue & Co. enjoy the opposite scenario—a ready-made asset base searching for the right funds to invest in. Based in suburban Atlanta, Ronald Blue is a full-service, fee-only wealth management firm with offices in 13 states, more than 6,000 household clients and more than $7 billion in assets under management.
The ETFs are being created and launched by Vident Financial (with help from various partners), a separate entity formed by Ronald Blue that serves as an oversight trust for the funds. Ronald Blue is responsible for the underlying investment principles of the indexes tracked by the Vident International Equity Fund (VIDI) and Vident Core U.S. Equity Fund (VIUS). The former began trading this week; the latter is still in the oven.
A number of RIAs have created mutual funds or ETFs through third parties that handle the regulatory and administrative chores needed to bring a product idea to market. Most of those funds are based on specific investment strategies from money management-type investment advisors. Ronald Blue’s case differs in that it’s a traditional financial planning firm, and its funds aren’t based so much on an investment strategy as they are on investment principles.
While Ronald Blue’s philosophical foundation is built on biblical principles, the investment principles of the Vident funds don’t necessarily reflect religious values. “The funds aren’t based on Christian principles,” says Vince Birley, chief strategy officer at Ronald Blue. “They’re designed to be principles on how to make good investment decisions.”
These core economic and investment principles pertain to human productivity, leadership and governance, and inherent value. They also deal with the principles of uncertainty, instability and applied wisdom. The goal is to bring a long-term perspective to long-term investments.
The Vident International Equity Fund tracks the Vident International Equity Index, a risk-weighted index spread across 35 developed and emerging market countries that Vident believes have faster growth potential and more productive populations and which represent lower fundamental risk versus traditional cap-weighted strategies. The fund’s expense ratio is 0.75%.
The Vident Core U.S. Equity Fund is still in registration with the SEC and is expected to launch either later this year or early next year. Its index remains under construction.
Birley says Ronald Blue established its set of investment principles after the market crash of ’08-’09 to provide a stable, transparent investment process to combat market volatility and to help clients better understand its investment process. But it had a hard time finding existing funds that reflect those principles. “We thought maybe we could take these ideas and create an actual, commingled product that would be easier to implement,” Birley says.
As part of that process, the firm established Vident Financial as the oversight trust. Birley sits on the trust so that Ronald Blue can influence how the ETFs’ underlying indexes are built, but Vident is a separate entity that keeps all of the profits, which it expects to return to investors in the form of lower fees and other benefits. “The trust was created to make sure there weren’t any financial conflicts of interest with Ronald Blue & Co.,” says Vident CEO Nick Stonestreet.
The Vident funds were designed to serve as core holdings in Ronald Blue’s client portfolios, which provides them with a ready-made audience. And while Vident doesn’t plan to market the funds to other advisors and investors, it believes they can attract a wider audience. “We think the funds’ construction will have relevance beyond Ronald Blue & Co.,” Stonestreet says.