29th Jan 2020 – 8:00am
SEI gears up for non or semi-transparent ETFs
Commenting on the new non-transparent or semi-transparent ETFs expected to launch soon in the US, John Alshefski, Senior Vice President and Managing Director and Head of SEI’s Traditional business within the Investment Manager Services division, explains that the firm is extending its USD75 billion Advisors’ Inner Circle (AIC) platform to incorporate ETFs within its turnkey series trust operational infrastructure
SEI’s Rob Owens, Managing Director and Head of Client Service for Traditional Business within SEI’s Investment Manager Services division, explains that allowing non-transparent ETFs is an opportunity for active managers to expand their distribution capabilities. “The AIC series trust enables investment organisations to rapidly launch and grow mutual funds and ETFs without having to build their own fund operating infrastructure.” But adds Owens: “Ultimately, these changes should benefit the investor.”
Owens says that SEI is a big believer in the arrival of these new ETFs, and this has been a period of the most drastic changes to the firm’s service model.
“We have recently begun going down the path of expanding it to ETFs with the thought that these semi-transparent orders were on their way and luckily we were on that path as the news broke.
“On our side, it’s an opportunity for active managers who have been on the sidelines on ETFs to explore if it’s a vehicle that fits their distribution needs and capabilities.”
Owens confirms that, from a servicing perspective, the firm has had everything built for a long time and is comfortable with where they are from a technology perspective.
“We feel good about the opportunity to partner with large institutional grade managers who might be looking for an infrastructure to support them as they enter the ETF space,” Owens says. In terms of adopting the new structures, Owens says that it’s a question of waiting for someone to take that first leap. “People are looking to see who will be the first to weigh in heavily,” he says.
A number of players have stepped up to register a semi-transparent ETF structure, from Natixis to Fidelity to T Rowe Price to Blue Tractor.
“What you are seeing is that they have all brought a methodology which is somewhat similar and somewhat distinct,” Owens says.
Alshefski comments that the firm already services over 160 investment managers.
“From our perspective, it seems like if non-transparent ETFs keep this progression, we are in a position to provide our clients with a platform to go in either direction with non-transparent ETFs running side by side with their mutual funds. We have a turnkey solution for running a parallel ETF and active mutual fund.”
Owens agrees saying: “We view our relationship with the 160 plus managers as a true partnership. As the investment management landscape continues to evolve, we want to be positioned to support them, however their packaging and distribution needs are dictated to them. We want to be in a position to help them.”
Alshefski comments that the continued market acceptance of ETFs by the market in general for their attributes of being a more cost effective and flexible way to build an investment portfolio has contributed to the general outflows from mutual funds over the past couple of years and inflows into ETFs.
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