MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
|
Tuesday, July 9, 2024 Why Experienced Mutual Fund Managers Should Consider Utilizing a Series Trust When Entering the ETF Market. According to Fuse Research, there are more than 450 mutual fund managers sitting on the ETF sidelines, representing over $2 trillion, a tremendous amount of packed powder to drive growth. For these mutual fund managers looking to enter the ETF market, consideration of a Series Trust is beneficial for several reasons:
Speed to MarketExperience matters! When launching an ETF understanding how to navigate the process can be critical in maintaining speed and momentum. Depending on the strategy, we have seen numerous ETFs obtain the first to market advantage — sometimes resulting in billions of dollars. Working with an organization who can quarterback the process and understand where not to get tripped up can be vital to obtaining that first-to-market advantage. Board OversightETFs and mutual funds are both regulated under the Investment Company Act of 1940, but ETFs operate under specific rules tailored to their structure, such as SEC Rule 6c-11, which provides certain exemptions and conditions for ETFs. These differences can be significant due to their structural and operational distinctions and can be a learning curve for Boards that have no experience. ETF boards need to be particularly attuned to the nuances of market price tracking and the creation/redemption mechanisms. Boards need to understand and oversee the impact of market dynamics on the ETF's price and liquidity, as well as the relationships with Authorized Participants (APs) and market makers who play crucial roles in the ETF's liquidity and price stability. Authorized Participant (AP) AgreementsAuthorized Participants (APs) are integral to the creation and redemption process, which helps maintain the ETF's liquidity and ensures that its market price closely tracks its net asset value (NAV). These agreements are executed at the Trust and Distributor level; utilizing a Series Trust with an existing broad representatoon in place ensures maximum efficiency (operational, liquidity, and tax), for fund issuers, allowing them to focus on delivering superior returns, and raising capital, not spending time on the non-revenue generating aspects of the business. Without having these agreements in place would ensure a lengthy process, often taking 6+ months to secure, severely reducing an ETFs effectiveness within the market for shareholders. The popularity of ETFs continues to develop, and actively managed ETFs are poised to emerge into the mainstream. Active managers are highly intrigued by these structures due to the desirable characteristics they offer shareholders. Many of these managers are considering established, affordable platforms that provide the experience, knowledge, and education needed to bring products quickly to market. A Series Trust is a great way to access all three. Steven Plump is the CEO and president of the RBB Fund Complex, an open-architecture, cost sharing, turnkey ETF and mutual fund solution and series trust provider that supports about $28 billion in assets from 12 investment advisors, more than 20 unaffiliated subadvisors, and more than 60 mutual funds and ETFs. Printed from: MFWire.com/story.asp?s=67629 Copyright 2024, InvestmentWires, Inc. All Rights Reserved |
