[This article appears in our September 2019 issue of ETF Report.]
Global X has been on the cutting edge of thematic investing for the past decade. Roughly 18 months since being acquired by Mirae Asset Global Investments, the firm is now seeing new avenues open up with the expanded resources and audience. Global X offers nearly 70 ETFs, with more than $10 billion in assets under management; its largest ETF is the $1.5 billion Global X Robotics & Artificial Intelligence ETF (BOTZ). Here, CEO Luis Berruga discusses his firm’s leadership position in the thematic ETF space and where it’s looking for the future.
How is Global X positioning itself after the Mirae acquisition?
Things are going very well. We're very excited about the future ahead of us with Mirae. It’s now been 18 months approximately since we announced the transaction, and we’re very proud of all the developments so far.
In terms of assets, we’ve grown by more than 25% so far since the transaction. We’re working to expand our suite of products, mainly around thematic investing. We have cloud computing, genomics and e-commerce ETFs. We were also able to expand our income suite of products, which is a very strategic family of funds for us.
As a result of the transaction with Mirae, we brought active funds that Mirae had launched with its Horizons US ETF business to our platform on Global X. Those are our covered call strategies, the Global X NASDAQ 100 Covered Call ETF (QYLD) and Global X S&P 500 Covered Call ETF (HSPX). They’ve done really well, and have approximately doubled in size since we closed the transaction.
Another family that we’ve been very focused on has been the China sector suite of ETFs that we launched in December 2018. It’s still early, but we’re getting significant interest in that family as well.
We’re very focused on international distribution. Before the transaction with Mirae, we were very U.S. focused from a distribution standpoint. But being part of a big global firm such as Mirae definitely opens up critical opportunities for us from an international distribution standpoint.
One other component of the business that is doing fairly well in the last 12-18 months is our model portfolio business. We hired Jon Maier in June 2017. Due to legal compliance requirements, it definitely takes time to get these businesses off the ground, but we’ve now been pretty much fully up and running for 18 months, and that’s an area of the business where we’ve seen significant growth.
How does Global X stay on the cutting edge with regard to the ETFs it launches?
If you look at our top products, you’ll see some common themes. The way we think about the business is simple: Pretty much every single client portfolio in the world needs either growth or income. If you look at those top ETFs, you’ll see a significant amount of what we call thematic growth ETFs and our income suite of products. I think we’re widely considered the leaders in the thematic investing space.
We’ve been doing this for much longer than anyone else. Global X started developing thematic products almost 10 years ago. We launched our very first thematic product, the Global X Lithium & Battery Tech ETF (LIT) back in 2010, and we have the largest offering of thematic ETFs in the U.S.
We have the biggest robotics ETF in the U.S., which is our BOTZ ETF. We also have clearly one of the fastest-growing thematic ETFs in the last few months, our cloud computing ETF. [Editor’s note: The Global X Cloud Computing ETF (CLOU) has pulled in more than $480 million in 2019 through the end of July.] Our Global X FinTech ETF (FINX) has been one of the best-performing ETFs since we launched it back in 2016.
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.