Investor demand for exchange-traded funds isn’t slowing, and firms that don’t offer ETFs could risk losing business, according to one Goldman Sachs expert.
Steve Sachs, chief operating officer of Goldman ETF Accelerator, notes that despite the time and resources required to launch an ETF, it does not offer current or new investment strategies because ETFs can be even more costly.
“Any client of ours will tell you that opportunity costs are not [offering ETF products] more,” he said recently on CNBC’s “ETF Edge.”
If a company doesn’t have ETF offerings, Sachs believes that “eventually those assets will go away and go to a competitor that does.”
To assist clients in the process of launching their own ETF products, Goldman Sachs created my own ETF Accelerator, a digital platform that helps clients launch, list and manage their own ETF products. The accelerator launched in 2022 in response to what Sachs called significant customer demand.
“Our major institutional clients were calling and asking, ‘How do we get into the ETF space? How do we implement our strategy, active or not, in an ETF wrapper?” – he said.
According to Sachs, client requests to launch ETFs have increased sharply since the adoption of SEC Rule 6c-11 in 2019, which is intended to help these funds launch more efficiently.
“While we wouldn’t call it a big boom, it was certainly a catalyst. The idea was that it would make it easier to start an ETF, but it didn’t make it any easier,” Sachs said. “At one point we had over 41 clients who came to us with the same problem: ‘How do I do this, how do I move quickly and can you help us?’”
It can take years to build the expertise, staffing and risk management systems needed to launch an ETF, Sachs said. This is where Goldman’s accelerator platform comes in to help.
“[It] allows our clients to come, launch, list and manage their own ETFs, but do so using the technology, infrastructure and risk management expertise that Goldman is known for, and essentially get to market faster and cheaper than they could do it themselves “,” Sachs said.
Since its inception, the accelerator has facilitated the launch of five ETFs. The most recent is Eagle Capital Management’s publicly traded Select Equity ETF (EAGL). last week.
Other ETFs launched through the accelerator include GMO’s US Quality ETF (QLTY) and three funds from Brandes Investment Partners: Brandes Small-Mid Cap Value ETF (BSMC), US Value ETF (BUSA) and International ETF (BINV).
“GMO, Brandeis [and] Eagle Capital believed that the path to building it in-house would be too expensive and time-consuming,” Sachs said. “They didn’t want to miss out on the opportunity costs of not implementing their investment strategies in a wrapper.”
Denial of responsibility