If you’re an ETF issuing company or thinking about creating an ETF let me just say, Good Luck!
Let me qualify my sentiment and the image above, that looks like a roulette table in my opinion, by sharing with you some ETF AUM data. In our ETF Stats – Food for Thought post you’ll note that 98% of ETF AUM is owned by 20 ETF issuing companies. The top 2 companies which are Blackrock and Vanguard own 65% of ETF AUM. As of May 5th, 2020 total ETF AUM for all issuing companies was $3.9T. Let’s these key stats sink in and I hope you can see where I’m going with this to explain my sentiment.
Now let’s dig into Vanguard for a bit. Vanguard has been in the investment world for over 40 years. They have a large team of sales and marketing professionals that have helped them accumulate a large amount of assets over time. Per Wikipedia it looks like Vanguard has just under 17,000 employees and over $6 Trillion in assets as of 1/31/2020. They are huge needless to say, but the point we need to truly understand is that they have a large sales and marketing team to help them distribute their product that smaller and newer ETF issuing companies don’t.
Here’s a newer ETF issuing company’s profile over the past 10 years. What you’ll typically find in a newer ETF issuing company are a few employees. You’ll find a portfolio manager and his/her’s PM assistant, the backer/CEO, and if they’re lucky they’ll have one maybe two licensed sales reps/wholesalers. That’s it. These newer ETF players are good at creating portfolio solutions…net selling and distributing.
So back to my comment, “Good Luck”. If you’re an ETF issuer and/or thinking of launching a new ETF it will be a gamble and a money drain. Especially if you don’t have a solid business development plan and team to help grow your AUM. Vanguard and Blackrock have thousands of employees selling their product and chances are you’ll probably have none to maybe 1 or 2 licensed sales reps pushing your product. So good luck selecting the right number or color on the roulette table. You might have a better chance wining going to Vegas.
But it’s not all doom and gloom for the tiny ones; there’s hope but it will still be a hard and difficult road. There are automated marketing and business development solutions out there that make a small company seem like a large company. If you’re a newer ETF Issuer or thinking of launching a new ETF, reach out to us at firstname.lastname@example.org. We have a team of partners that can help you develop a business development process to grow AUM and also launch your ETF. We want to help “the other 10%” as much as possible.