"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.