How does Global X develop a thematic ETF from concept to launch?
One of the first things we look at is high conviction: Do we as a team think that these particular companies will be an important part of the economy for the next 10, 15, 20 years? If the answer is yes, we move on to the next step. For us, it was a no-brainer that cloud computing is just fundamentally changing the infrastructure capabilities of IT around the world, and how businesses and retail customers operate. We have a very high conviction that that would be a trend that would be very well funded for the next 10, 15, 20 years out.
The second aspect we look at is the stability. Are there enough public companies that provide the desired exposure to a particular space? Typically, we like to see around 30 companies for us to feel comfortable launching a new product. Again, if the answer is yes, we move on to the next step.
But that second step is very important, because it’s directly tied to the product development process. When we talk about if there are enough companies to provide the right exposure, we’re looking for companies that provide a pure-play exposure to the theme.
Blockchain is one that comes up all the time from our clients. We have high conviction on the theme, but when we try to identify companies that provide that direct pure-play exposure, the reality is that we don’t think there are enough companies.
It’s important to make that differentiation, because I think we’ve gained a ton of credibility in the space, not only for the products that we’ve launched in the thematic investing space, but even more so for the products we haven’t launched because we didn’t feel confident it was the right exposure for our clients.
How will Global X continue differentiating itself going forward?
We see a ton of opportunity outside the U.S., specifically in Asia, because clients in Asia seem to be very interested in thematic investing. They like our story. They like our products. They like how we build our products. And if you take that interest with Mirae Assets’ very strong presence in the region, we do think the opportunity is [significant].
And then finally, we feel strongly about our model portfolio business. As I mentioned before, in 2017, we hired Jon Maier, who is arguably one of the most reputable names in this space. It did take time to build up the business, but now we’ve been fully up and running for quite some time, and I think we have an interesting story, because our products allow us to build different shared model portfolios that no one else is doing.
We are in multiple platforms like Envestnet, GoWealth, TD and Interactive Brokers. In Asia, we’re already in the process of establishing a few partnerships with local asset management in the region.