By Philippa Aylmer – S-Network Global Indexes, an Alerian company, began publishing indexes in 2006 and currently publishes over 1,000 indexes, predominantly in the energy, smart beta and thematic space. So far this year, the firm, which was acquired by Alerian in early 2020, has launched over 50 indexes.
“Despite the pandemic,” says Patrick Shaddow, Head of Index Operations at S-Network Global Indexes, “We stuck to our process and protocols and continued to deliver to our clients the high-quality products and service they have come to expect from us.”
Shaddow believes that their focus on being client-centric, nimble and efficient differentiates their offering. “We can launch indexes within a few weeks because of the unique data construction process we deploy for our base universes and global equity indexes.”
There is growing interest in the thematic investment space from both current participants and new entrants to the market. “With non-transparent active ETFs achieving regulatory approval, the implementation of the new ETF rule and growth of fixed income ETFs, we are at a unique crossroads in the ETF industry,” he says.
Registered Investment Advisors who are not active in the business are looking to potentially eliminate some of the sub-advisers they have used to derive performance for particular investment themes or styles.
These developments are creating a strong tail wind for index-based investing and Shaddow envisions an ongoing transition to index-based investments.
“Many asset managers have been on the sidelines of the ETF industry for years and the new ETF Rule creates a lower barrier to entry to get into the ETF business. Looking ahead, S-Network is well positioned to be at the centre of these key growth areas. As the industry evolves, we will continue to support the needs of the global investment community.”
Shaddow believes that people are coming to S-Network because they take a more streamlined approach to thematic investing. “We seek to put together a truly pure-play investment, offering a high active share; these companies would not be highly allocated in your broad-based portfolio.” He adds that themes could be anything from ESG, recovery or infrastructure indexes.
One example of a pure-play streamlined approach is the S-Network Space Index which is tracked by The Procure Space ETF (Ticker: UFO). It uses a methodology unique to the space industry and focuses on companies that are significantly engaged in space-related activities, devoting 80 per cent of the weight to a pure-play tranche.
Other thematic indexes include the O’Shares Global Internet Giants Index, powered by S-Network and tracked by the O’Shares Global Internet Giants ETF (Ticker: OGIG) which is up 60 percent this year, and the S-Network Medical Breakthroughs Index, tracked by the ALPS Medical Breakthroughs ETF (Ticker: SBIO).
S-Network also specialises in providing core index strategies such as the S-Network BlackSwan Core Index tracked by the Amplify BlackSwan Growth & Treasury Core ETF (Ticker: SWAN). The index allocates 90 per cent to US Treasuries in order to minimise volatility, while seeking higher returns by using the remaining portion to purchase long-dated call options (LEAPs) on the S&P 500. “The index is designed to offer clients exposure to the means of production of the US economy while maintaining capital preservation mechanisms which ensure lower volatility in black swan events.”
David LaValle, CEO, Alerian
David is the CEO of Alerian, a leading independent index provider focused on building innovative, index-based investment strategies with over USD23 billion in total assets tracking its indexes. David has over 20 years of experience in the financial markets. Most recently, David was the US Head of SPDR ETF Capital Markets and a member of the senior leadership team at State Street Global Advisors, a USD2.8 trillion dollar global asset manager. Prior to State Street, David led Nasdaq’s Exchange Traded Product Marketplace where he was responsible for all aspects of strategy and business development for Nasdaq’s ETF listing and trading businesses.
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