Small ETF Issuer’s Road To Success

February 07, 2020

Defiance ETFs is small new issuer working to carve out a niche in the growing segment of thematic ETFs. One of the firm’s newer and bigger successes is the Defiance Next Gen Connectivity ETF (FIVG), which gathered $220 million in assets in less than a year. We caught up with Paul Dellaquila, president of Defiance ETFs, to talk about how the firm is navigating a market filled with giants and is finding success. Defiance seems to be building a lineup of next-generation thematic ETFs. Is that how the firm is positioning itself, or is this just the first round?

Paul Dellaquila: One of our tag lines is "ETFs built for the next generation." We wanted to come up with unique exposures that are focused on the next generation of investors—in transformative technologies, transformative industries that are going to impact our lives for years to come.


We also play into how advisors, institutions and investors in general have begun to use ETFs in different ways. For many years, ETFs were core building blocks of core exposure. We’re now seeing a lot more investors complement the core of their portfolio with thematic ETFs as a way to generate alpha, or just to add differentiation. Asset flow trends show that there’s strong demand for your lowest-cost core beta products. Is that making it more difficult to pitch thematic—often higher-cost—ETFs?

Dellaquila: That’s a good question. When an investor looks at an ETF, cost is probably the first metric they look at. It shouldn't be the only one. We’ve tried to offer up our thematic ETFs at a price point that’s attractive to investors. We're in the 30-40 basis point range, which is very attractive relative to the other thematic ETFs out there.


That said, being a new issuer is extremely difficult. It’s much more difficult to get your ETF to grow from a $2.5 million or $5 million seed to $100 million. Once you hit that magic number, it gets a whole lot easier to sell. It's way easier to go from $100 million to $1 billion.


But we had tail winds at our back. My business partner, Matt Bielski, and I have over 30 years' [combined] ETF experience. We have a lot of relationships in the industry. We pulled every lever we could. But we set a solid foundation, and I think it’s going to be an exponentially big road for us this year.

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