What is your process for launching a fund? How do you decide what to roll out?
Most of the product development work over the last few years has been done in that buy-and-hold, nongeared space. We look at three things: the investment merit of a potential product. We look at the commercial merit. And then we look at just the feasibility of delivering that investment objective. I guess underneath the commercial merit, you might include: Are we offering something that’s unique and different to the marketplace?
Our goal is to try and push boundaries and create products that are value-add and not “me-too” products. A great example of that is the ProShares Pet Care ETF (PAWZ) that we developed and launched [in 2019] and that has had a nice consistent flow.
It’s got about $53 million, and it’s a fairly new fund. We’ve gotten tremendous attention paid to it. People can relate to the concept and understand how much money they’re spending on their pets and how that translates into investment opportunity. And we were able to deliver it in a way that I think is pretty powerful, focused on over 20 public companies that are in this space.
How do you see the market as having changed since ProShares first entered the ETF space?
Clearly, the single biggest thing is the level of competition in terms of sponsors, number of sponsors, as well as number of products. But obviously, we’ve got shelf-space issues now that didn’t exist back then. You used to put a product out, and basically it went up on every platform almost automatically. Now, getting a product into a distribution system is very difficult. That’s obviously a huge difference.
Other obvious ones are fee compression, distribution and competition. All of those have created an environment where you’d better feel really good about the products you have, and you’d better decide where you want to focus, because you can’t focus on everything.
What’s ahead for ProShares?
We like reinventing ourselves. We started as a mutual fund company. We reinvented ourselves in 2006 or so, and became an ETF company very quickly—and a top10 ETF company.
We reinvented ourselves again five years ago when we started to diversify the product line. That buy-and-hold business is now $9.8 billion—that’s a top 20 ETF company on its own. We’re not afraid. That’s our culture. We’re not afraid to challenge conventional thinking, but also challenge ourselves to say, where’s the next mountain?