Doing The Day-To-Day Heavy ETF Lifting

April 28, 2017

Dustin LewellynDustin Lewellyn

Chief Investment Officer

Penserra

 

 

 

 

 

[Editor's note: In our May ETF Report, "Behind The Curtain," we profile four firms, which you may or may not have heard of, that have deep roots in the industry, sometimes through multiple business lines. These are the lawyers, the index providers, the custodians, the liquidity providers and the market makers that keep the gears of the ETF industry spinning. See "The Guiding-Hand Firm For ETF Issuers," "Dechert Paves Way For Improved Regulations,"  "The Biggest Firm You Still Haven't Heard Of." ]

In the ETF world, subadvisors are unsung heroes. They sweat it out behind the scenes, handling the daily grind of fund operations, accounting and portfolio management. Yet their labors often go unseen, unnoticed. They are invisible.

That’s just fine by Dustin Lewellyn.

“Most [sponsors and advisors] don’t want to worry about the day-to-day,” said Lewellyn, chief investment officer at Penserra, a financial services provider based in Orinda, California. “It’s just easier for them to farm it out to someone like us.”

Offload Management Work
Running an ETF is no simple task. Subadvisors like Penserra shoulder the heavy lifting, so that larger asset management firms are free to focus on big-picture tasks, like distribution, marketing, sales—and, of course—strategy.

“People don’t come to us for our own proprietary investment methodology,” said Lewellyn. “They come to us because we’re good at figuring out the most efficient way to implement their strategies.”

Currently, Penserra subadvises 21 active and passive ETFs, together worth over $1 billion in assets. By far, its most successful fund is the $970 million PureFunds ISE Cyber Security ETF (HACK).

But Penserra actually touches the ETF industry in several different ways.

For starters, the firm’s broker-dealer arm, Penserra Securities, helps execute trades with a focus on all-ETF portfolios and large-block ETF trades. It specializes in tricky risk or cash management situations, such as rebalancing many ETFs at once, and often works with big-name clients looking to protect their anonymity as they research potential trades. “A smaller shop like ours can offer more stealth in managing that information flow,” Lewellyn noted.

'ETF Whisperer'
Penserra also offers consulting services to help big fund managers identify and capitalize on opportunities in the ETF space. Lewellyn personally drives this effort, acting as a sort of ‘ETF whisperer’ to clients by analyzing how they launch, manage and operate their funds, as well as educate them on best practices. 

Then there’s Penserra’s asset management business, Penserra Capital. That’s where Lewellyn spends most of his days, and it’s where the firm’s subadvisory service lies.

Here’s how it works: When an advisor or sponsor comes up with an idea for an ETF, it comes to Penserra to bring its index methodology to life.

Penserra helps with the setup work behind launching an ETF, partnering with accountants, custodians and distributors to ensure a smooth process flow on day 1. Sometimes it’ll even help tweak the ETF’s index for better tradability or liquidity. But it’s not Penserra’s job, says Lewellyn, to take a view on strategy, beyond his firm’s ability to implement it.

 

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