ETF industry’s own ETF records strong first-year returns

May 3rd, 2018 | By | Category: Equities

The first ETF to target the ETF industry – the ETF Industry Exposure & Financial Services ETF (TETF US)  has delivered a strong return of 36.0% in the first year since its launch on 30 April 2017.

Mike Venuto, CIO of Toroso Investments

Mike Venuto, CIO of Toroso Investments.

The impressive performance means it has significantly outperformed the S&P 500 and the Financial Select Sector Index (which represents the performance of the financial sector within the S&P 500), which have returned 14.4% and 17.6% over the same period.

TETF provides investors with access to the performance of companies driving and participating in the growth of the ETF industry. It does this by investing in a portfolio of publicly traded companies that derive revenue from the ETF ecosystem.

“ETFs are one of the most meaningful innovations in the financial services industry in decades,” said Mike Venuto, CIO of Toroso Investments.

“It has completely changed the way portfolios are constructed, impacting everyone from the smallest retail investor to the biggest institutions. The key facets of the structure – transparency, liquidity, lower costs – are by now well understood, but investors are just now catching onto the fact that as the ETF has gone mainstream, the ETF industry itself has emerged as a compelling investment idea.” 

“ETFs are one of the most meaningful innovations in the financial services industry in decades.”
Mike Venuto, CIO of Toroso Investments

In 2017, US-listed ETFs saw record-setting inflows of $476bn, ending the year with more than $3.4tn in total industry assets.

“The growth trajectory of the category in the US has been phenomenal,” said Guillermo Trias, CEO of Toroso Investments. “But this is not just an American story. Europe and Asia also have vibrant ETF ecosystems, and Europe in particular, following the implementation of MiFID II, seems poised for growth in its ETF product lineup and asset base.”

TETF tracks the Toroso ETF Industry Index whose constituents include ETF sponsors, index & data companies, trading & custody providers, liquidity providers, and exchanges.

The index is maintained by Solactive and has four tiers of constituents:

  • Tier 1 accounts for 50% of the index’s exposure and is made up of companies with substantial participation in the ETF industry, providing direct financial impact to shareholders, including BlackRock, Charles Schwab, Invesco, State Street, WisdomTree, and more.
  • Tier 2 accounts for 25% of the index’s exposure and is made up of companies with substantial participation in the ETF industry, providing indirect financial impact to shareholders, including KCG Holdings, Nasdaq, Intercontinental Exchange, and more.
  • Tier 3 accounts for 15% of the index’s exposure and is made up of companies with moderate levels of participation in industry, including Bank of New York Mellon, US Bancorp, FactSet, Ameriprise Financial, and more.
  • Tier 4 accounts for 10% of the index’s exposure and is made up of companies that are new or participating in a smaller way in the ETF industry relative to their overall focus, including Morningstar, Eaton Vance, Goldman Sachs, Legg Mason, Citigroup, and more.

The index has 44 constituents, of which the largest three are Invesco (6.3%), S&P Global (6.3%) and Intercontinental Exchange (6.3%).

The fund is listed on NYSE Arca and has an expense ratio of 64bps.

Despite the stellar performance in its opening year, the ETF has yet to gain a significant following and currently has assets under management of just $8m.

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