Goldman Sachs: Low Cost ETFs Key For Us

October 08, 2015 Some say you’re late to the party. Why make a move into the ETF space now?

Crinieri: First of all, we still think it’s early insofar as the development of the ETF market. There's $2 trillion in assets in U.S. ETFs alone. Goldman Sachs research on the ETF sector concluded that the global ETF market could double in size by 2020. There’s significant room for growth.

But really, the reason we’re doing it now is that our customers are asking for it. Our clients have asked for these strategies in an ETF wrapper. So we’re responding to demand from our clients.

We also think the market has evolved from the traditional index products to more strategic products that are more leaning toward active management, and that really plays to GSAM’s strengths. Will Goldman remain focused on multifactor approaches? Are you going to consider active ETFs? What comes next?

Crinieri: We intend to have a broad offering of ETFs over time. We’re focusing on the ActiveBeta products right now. We’ve filed for six of those; two are launched already. So there are four additional products to come, including U.S. small-cap, international, Europe and Japan.

We’ve also filed for five liquid alternative strategies, which are hedge fund replication strategies. We have a multistrategy hedge fund replicator, and then four individual hedge fund strategies that we’ve already filed for. And we have a pipeline of other products that we’re working on that have not been filed yet. To clarify, you’re marketing your first ETFs as “ActiveBeta.” How much of these strategies are actively managed?

Crinieri: These strategies are designed by our quant team, who have a lot of experience in this area, but they are 100 percent rules-based. They’re rebalanced on a quarterly basis, so no one’s making investment decisions along the way. It’s really an index-based strategy. Can you tell me a little about your first ETFs?

Crinieri: We launched GSLC (the Goldman Sachs ActiveBeta U.S. Large Cap Equity) on Sept. 21, priced at 9 bps—very competitive to products in the traditional beta space. This strategy works very well over long periods of time, but also over different geographies.

We apply this strategy to the emerging markets in our Emerging Markets Equity (GEM), which we launched on Sept. 21, just as we apply it to U.S. stocks with very interesting results. This is a great way for investors to think about outperforming the market when it comes to their emerging market allocation at a competitive price.

We’re obviously going through a period of volatility, especially in the emerging markets, but what we’re hearing from clients is that they’re looking for new opportunities in the space, so it’s an interesting time to be bringing a new alternative to the market. What do you think will be the most difficult thing for Goldman to get traction in the ETF market?

Crinieri: We really think we’re very well-positioned. We have interesting strategies. We’re a well-known asset manager and have a great distribution team that can really help get the word out to our investors. We’re pretty excited about the opportunities.

Contact Cinthia Murphy at [email protected].

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