Anatomy Of WBI’s Eye-Popping ETF Debut

September 23, 2014

To hear the firm’s founder tell the tale, many of WBI’s clients couldn’t wait to own ETFs.

Less than a month ago, WBI Investments made ETF-industry history with a 10-fund rollout that turned heads because of its instant success. Investors poured more than $1 billion into the Red Bank, N.J.-based money management firm’s new funds within a day.

To be sure, most of those investors were pre-existing clients of WBI, a firm with $3.1 billion in client assets whose actively managed strategies have been available in separately managed accounts as well as open-end mutual fund wrappers. That makes WBI the latest example of what we call “bespoken” ETFs—funds that have clients lined up even before they launch.

And because the firm’s clients are largely other financial advisors, WBI has become, in one quick turn of events, a successful ETF strategist that serves up model ETF portfolios for other advisors who are keen on outsourcing money management so they can focus on comprehensive financial planning.

But as WBI founder and Chief Executive Officer Don Schreiber told Managing Editor Olly Ludwig in a recent interview, it’s noteworthy that those WBI clients who now own ETFs were willing to brave any tax consequences coming their way after making the switch.

That speaks to one of the virtues of ETFs; namely, tax efficiency. But it also speaks to the lasting commitment Schreiber’s firm plans to bring to its foray into the rapidly growing world of ETFs. Was it a surprise to gather all those assets so quickly?

Schreiber: No. We had a lot of demand for our products in an ETF format. Because we're active managers, the ETF gives us more tax efficiency and allows us to enhance some of the tools we can use to mitigate risk and to participate in upside returns. I think advisors and their clients wanted to take advantage of that opportunity to use the same management system, the same strategy that we have had for 22 years, but in a more efficient, more powerful way through ETFs. Your clients are essentially other advisors, and you really don't service the end-investor population?

Schreiber: That is correct. We wholesale through advisors; predominantly that's our main market. What percentage of that was from existing clients who simply wanted to shift to that ETF wrapper?

Schreiber: The majority of the assets … and we had some direct ETFs flow that we had initially and we still have that on an ongoing basis. The ETFs give us advisors that we really weren't servicing before, selling to before. We use ETFs as a primary allocation tool instead of mutual funds as separately managed accounts.



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