Fixed income remains the cornerstone of the global financial system, providing the essential capital that powers sovereign and corporate growth. The fixed income ETF market has become a primary liquidity vehicle for these assets, with global assets under management surpassing $3.2 trillion as of early 2026.

For asset managers, building a fixed income ETF is not just a matter of selecting an index, it is a strategic investment decision. The chosen benchmark determines duration, credit exposure, and portfolio implementability, and ultimately shapes fund performance, diversification, and investor perception. Understanding how a market index is constructed, how it aligns with investment objectives, and how it handles the practicalities of bond markets is therefore critical.

How fixed income indices are built

A fixed income index is a rules-based framework that defines which bonds belong in a portfolio. These rules typically cover the type of issuer, credit ratings, and minimum outstanding amounts. Most indices are market cap weighted, meaning issuers with the largest debt profiles—sovereigns or corporations—have the largest impact. For portfolio managers, this highlights concentration risk, which must be monitored to maintain balance and achieve true diversification.

Unlike equities, bonds often trade over the counter (OTC), rather than on centralized exchanges. Pricing must be gathered from multiple sources, including dealers, trade reporting systems, and specialized platforms. High-quality data ensures that the index represents the prices portfolio managers can realistically execute, avoiding discrepancies between paper returns and live portfolio performance.

Fixed income indices may span multiple asset classes, including government, quasi-sovereign, and corporate bonds, and sometimes incorporate money market instruments to manage short-term liquidity or duration exposure. Global bond markets introduce additional complexity, with differing credit standards, trading conventions, and regulatory frameworks across regions. For managers building multi-asset or globally diversified portfolios, these differences must be reflected accurately in the benchmark.

Types of fixed income Indices

Fixed income indices serve different purposes depending on the exposure, strategy, and investor objectives. Understanding the distinctions helps portfolio managers choose the right benchmark and manage implementation effectively.

  • Broad Market Indices. These indices provide comprehensive coverage across sectors and credit qualities, capturing the overall fixed income market. They typically include sovereign, quasi-sovereign, and corporate debt, and sometimes money market instruments for short-term duration exposure. Broad market indices are ideal for core allocation and serve as a baseline for multi-asset portfolios.
  • Credit-Focused Indices. Credit indices target specific segments of the bond market, such as investment-grade or high-yield debt. By focusing on credit quality, managers can benchmark exposure to default risk, yield, and sector composition. These indices are commonly used to implement targeted strategies or measure performance relative to specific credit exposures.
  • Regional Indices. Regional indices isolate bonds from specific geographies, reflecting the unique trading conventions, regulatory environments, and market liquidity of each region. U.S., European, Latin American, and Asian indices allow managers to tailor allocations and track performance in a globally diversified portfolio.
  • Blended or Customized Indices. Blended and customized indices combine multiple building blocks from broad, credit, or regional indices to create a benchmark tailored to a fund’s specific strategy. They allow portfolio managers to control duration, credit exposure, or sector allocation, enabling precise alignment with investment objectives. Custom indices also enhance transparency and performance attribution, giving investors and regulators a clear view of portfolio composition and risk.

By selecting the appropriate type of fixed income index, portfolio managers can align benchmarks with fund objectives, maintain diversification, and control tracking error while ensuring transparency and implementability.

How fixed Income indices differ from equities

Unlike equities, bonds are finite instruments with defined maturities. They are issued, accrue over time, and eventually mature or may be called early, creating a constantly evolving investable universe. Fixed income indices must adapt to these changes to ensure that an ETF or fund remains aligned with its stated strategy.

Risk in fixed income is multi-dimensional. Portfolio managers must account for interest rate sensitivity, credit quality, sector exposure, and currency considerations. Because many bonds trade infrequently, liquidity is a key factor in both index construction and implementability. A well-designed fixed income index strikes a balance between accurately representing the target market and providing a realistic framework that can be efficiently replicated without generating excessive transaction costs.

While derivatives and hedging instruments are often employed to manage duration, currency, or yield curve positioning, the index itself serves as the core reference for the portfolio. Transparent rules governing eligibility, weighting, and sector allocation provide clarity for portfolio managers, enabling informed investment decisions and effective communication of strategy to investors.

The reality of rebalancing

Rebalancing is where an index is truly tested. Most fixed income indices reset monthly to incorporate new bond issuances, remove matured securities, and adjust for credit rating changes.

High-quality rebalancing processes are predictable, transparent, and operationally efficient. They give managers lead time to prepare trades, maintain portfolio duration targets, and manage sector allocation, while limiting turnover that could increase trading costs.

Operational rigor is essential. Clear disclosures, communication of pro forma files, and defined rebalance calendars allow portfolio managers to implement the index efficiently, whether the fund is focused on domestic markets, global bond markets, or multi-asset strategies.

Portfolio management considerations

Beyond construction and rebalancing, fixed income indices influence key investment decisions at the portfolio level. Properly designed benchmarks help managers optimize diversification, manage sector and credit concentration, and calibrate fixed-rate exposures to reflect target risk and return profiles.

Duration and yield curve positioning are critical. Short-duration indices reduce sensitivity to rising rates, while long-duration allocations may enhance returns in declining rate environments. Indices with dynamic yield curve exposure can be paired with derivatives overlays to fine-tune risk-adjusted returns without altering the underlying bond holdings.

Global considerations are increasingly important for multi-asset and globally diversified portfolios. Regional differences in credit quality, liquidity, and market conventions must be captured accurately. Currency risk can be addressed through hedging overlays or explicit index rules, ensuring that performance reflects the intended exposure.

Portfolio transparency and reporting also depend on index design. Detailed constituent-level data, clear disclosures, and consistent governance processes allow managers to communicate fund characteristics effectively to investors, regulators, and internal risk teams.

Key considerations for asset managers

Selecting the right fixed income index is about balancing representativeness, implementability, and operational discipline.

  • Liquidity vs. representation: Broad indices can include thousands of small, illiquid issues. Attempting to replicate them in a fund can increase tracking error and costs. Portfolio managers must consider whether the index’s constituents are actually tradable at scale.
  • Pricing and valuation: Indices that rely on outdated or estimated pricing models may create discrepancies between index levels and executable trades, generating hidden costs during rebalancing.
  • Duration and yield curve management: As bonds age, their sensitivity to interest rates changes. Indices must manage duration drift, ensuring alignment with the fund’s target risk profile.
  • Credit and sector allocation: Balanced exposure across investment-grade, high-yield, and sovereign debt segments is essential to maintain diversification and manage default risk.
  • Global considerations: Cross-border portfolios introduce currency risk, regional liquidity constraints, and differing regulatory frameworks. The index must reflect these realities to be a credible benchmark.
  • Transparency and governance: Clear rules, formal governance structures, and adherence to global principles like IOSCO help protect investors and portfolio managers alike.
  • Custom indices: While broad market indices are useful guides, customized benchmarks tailored to duration ranges, credit quality, ESG criteria, or sector tilts allow asset managers to measure performance more accurately and provide clear disclosure to investors.

Keeping all of these considerations in mind can help issuers build the products they want that can solve for investor problems.

VettaFi’s suite of fixed income indices

VettaFi offers a comprehensive suite of fixed income indices designed to meet the needs of sophisticated portfolio managers and ETF issuers. Our coverage spans major developed and emerging markets, across both investment-grade and high-yield credit, and includes corporate and sovereign bonds. In addition, we provide specialty indices tracking bank capital instruments, CoCos, insurance capital segments, and other niche credit exposures, enabling targeted benchmarking for complex strategies.

Our indices cover key regions, including the U.S., Canada, Europe, Latin America, and Asia, ensuring that managers can benchmark portfolios across global fixed-rate markets with confidence. All indices are designed to be customizable, allowing clients to align benchmarks with specific duration, credit, or sector preferences, while maintaining robust transparency and implementability.

Each VettaFi fixed income index carries over 15 years of historical data, with more than 10 years of live track record, providing portfolio managers with the context and reliability needed for performance evaluation, risk assessment, and investor reporting. Backed by institutional-grade data, disciplined methodology, and strong governance, VettaFi indices are built to support accurate benchmarking, clear disclosure, and operational efficiency in both standard and bespoke fixed income strategies.

VettaFi’s index suite is accessible via the Index Analyzer -  an online portal that allows portfolio managers and product teams to explore indices in depth. Users can slice and dice indices by region, sector, credit rating, or maturity, and access security-level details that drive index composition and performance. The tool provides transparency into index details, enabling managers to make informed investment decisions, conduct performance attribution, and validate replication strategies.

FAQs for asset managers

How much should I customize my benchmark?
Broad indices provide useful reference points, but custom indices allow a closer match to your portfolio’s risk-return profile, duration, credit, sector, and ESG objectives. Specialized index providers can help ensure transparency and relevance.

What makes an index provider reliable?
Reliability stems from transparent methodology, adherence to global standards like IOSCO, strong governance, and a proven ability to manage market stress without ad hoc methodology changes.

How important is historical data?
Long-term backtests provide context, but methodology quality and robustness across market cycles are more critical. An index must reflect realistic liquidity and trading conditions, not just historical returns.

How do governance and disclosure practices impact my fund?
Robust governance and comprehensive disclosures reduce operational and regulatory risk. They provide clarity on how indices handle unusual events, ensuring that portfolio managers can implement the benchmark confidently.

Can indices integrate with multi-asset strategies?
Yes. High-quality indices can serve as building blocks for multi-asset portfolios, providing consistent measurement across bonds, cash, and derivatives overlays. This allows managers to optimize total portfolio allocation while preserving transparency.

Partner with VettaFi

VettaFi offers a deep suite of fixed income indexing capabilities designed for portfolio managers who value both accuracy and implementability. Our indices cover global fixed-rate markets, span multiple asset classes, and support multi-asset strategies.

We combine rigorous methodology, robust data infrastructure, and disciplined governance to create benchmarks that are both transparent and practical to implement. Whether you need standard indices or bespoke solutions tailored to your portfolio’s duration, credit, sector, or ESG preferences, VettaFi has the expertise to help you bring your product to market efficiently.

Contact us today to explore how VettaFi can support your next fixed income ETF or index-linked product.

 

A week ago, while many were recovering from the Exchange conference, a significant wave of index-based ETFs underwent their quarterly rebalancing and reconstitution. While the growth of actively managed ETFs has dominated the headlines recently, the lion’s share of industry assets remains in index-based products. Despite being passive, they are far from static. Many of them, including those tracking VettaFi indexes, receive a strategic portfolio facelift every three months to ensure they remain aligned with their underlying objectives.

Investment Landscape Supports Rebalancing

“Over the past year, the investment landscape has been fundamentally reshaped by a second wave of AI integration, a global push for energy security, and the emergence of a more fragmented trade environment,” explained Dalton Easterwood, head of index products at TMX VettaFi. “These periodic realignments allow investors to capture emerging leaders while shedding laggards, ensuring the portfolio evolves at the same pace as the modern economy.”

Since the last index update in December, the broader U.S. equity market has faced fresh headwinds. Concerns regarding Middle East instability, delayed interest rate cuts, and shifting growth expectations for artificial intelligence have altered the risk-return profile for many companies.

Let’s look at how VettaFi’s March 2026 index rebalancing impacted several ETFs across the thematic and fundamental landscapes. Below are just examples of some of the position changes. 

Thematic Shifts: Gaming and Space

In the thematic arena, rebalancing ensures that exposure remains pure as company fundamentals shift. The Amplify Video Game Leaders ETF (GAMR) saw a rotation within its international holdings, adding Bilibili and NetEase while dropping Nexon. This maintains the fund’s focus on the developers and platforms truly driving global engagement. Meanwhile, in the US, NVIDIA was reduced by 1.89% to a capped weight of 10.0%, while Meta Platforms was cut by 1.60% to the same level. GMR only owns 21 stocks so any change is notable.

Though the Procure Space ETF (UFO) did not add new names this go-around the ETF tilted its weightings. The reweighting boosted established players like EchoStar, Garmin, and Trimble. Additionally, it reduced Planet Labs and MDA Space. This reflects the index’s rules-based adjustment to market caps and liquidity.

Fundamental Discipline: Small-Caps and Dividend Selection

Fundamentally weighted strategies also find rebalancing critical. The VictoryShares Small Cap Free Cash Flow ETF (SFLO) added several names including Build-A-Bear Workshop, Grid Dynamics, and Healthcare Services Group after they cleared the index’s rigorous free cash flow yield screens. Conversely, BK Technologies, Genie Energy, and Smith Douglas Homes were removed as their cash flow growth profiles no longer met the index’s top-tier requirements.

Finally, the Franklin US Dividend Booster Index ETF (XUDV), which tracks the VettaFi New Frontier US Dividend Select Index, underwent a refresh to its yield-seeking core. The fund added Lumentum Holdings Micron Technology and Western Digital while boosting exposure to Ares Management and Best Buy. To maintain its yield-to-volatility discipline, the index exited Dow Inc, Palantir Technologies and Pulte Group  and reduced positions in Chevron and Edison International.

These moves serve as a reminder to look under the hood Index investing isn’t about setting it and forgetting it. A disciplined, rules-based process evolves alongside the market and helps keep your and your client portfolios on track.

Key Takeaways

  • While index-based ETFs are often viewed as buy-and-hold vehicles, quarterly rebalancing ensures these portfolios undergo a strategic facelift to remain aligned with evolving market leadership and current economic realities.
  • Quarterly rebalancing for thematic indexes captured a shift in the international exposure. GAMR added companies such as Bilibili and NetEase.
  • For fundamentally constructed ETFs, rules-based rebalancing maintains quality control by rotating into superior cash flow and dividend profiles.

This article originally appeared in ETF Trends.

Drones have always been a niche military asset. In recent years, however, drones have gone beyond defence and entered government and commercial sectors. 2026 is poised to be a critical year for the growth of drones as an industry. Not only will drones see a bigger role in defence, but they will also benefit from evolving technology and regulatory tailwinds.

The drone story starts over a century ago

Toward the end of World War I, both the U.S. and Great Britain began experimenting with unmanned aerial vehicles (UAVs.) Innovations in drone technology have come in fits and starts since then. During the Vietnam war, drones were deployed as decoys; following 9/11, drones became more critical to surveillance. When Russia invaded Ukraine in 2022, drones became a crucial cornerstone in Ukraine’s defence. Industrial-scale drone production in the country rose from 0.8 million units in 2023 to four million by 2025. 

Precedence Research estimates that the UAV drone market in 2025 was $44.54 billion. The compound annual growth rate is estimated to be 16.77%. This means the drone market could hit $209.91 billion by 2025.

Given the invasion of Iran and growing geopolitical strife, defence is poised to be a major player in the ongoing drone story. Last year’s “Big Beautiful Bill” allocated billions for drone infrastructure. It also carved out a huge budget for increased drone spending, including:

  • 2.1 billion for medium unmanned surface vessels;

  • $1.5 billion for loitering munitions;

  • $1.5 billion for unmanned underwater vehicles; and

  • $1.3 billion for counter-UAS systems. 

In Europe, the European E5 LEAP programme seeks to develop low-cost air defence systems, with an aim for 2027 for project completion. NATO has targeted defence spending at 5% of GDP, which is up from 2%. The guideline puts 3.5% of those budgets towards core defence, with 1.5% for non-traditional defence that includes cybersecurity, AI, quantum computing, and autonomous technology.

The asymmetric payoff of drones in defence

In a recent webinar, Vettafi Head of Index Product Strategy Jane Edmonson and Head of BD EMEA & Asia Axel Belorde outlined drones' newly central role in global defence. "The global market is now favoring unmanned aerial systems over things like expensive fighter jet programs and missile programs,” Edmonson said. “Significant investment is flowing into things like drone swarms, surveillance, counter-drone technologies. And the other key element here is this integration of AI capabilities, which allows for advanced data collection and autonomous decision making, literally on the fly." 

Fighter jets and missile systems are being replaced by UAVs. Edmonson noted that drones provide an “asymmetric payoff” compared to an expensive fighter jet. Legacy models of defence are expensive, often costing more than the assets they destroy. An F-35, for example, uses about 20% titanium and 400 kg of rare earth minerals. A destroyer demands as much as 2,600 kg. Most drones need only a few grams of rare earth elements per unit, making the production of a drone significantly more affordable.

The Arizona-based SpektreWorks builds LUCAS drones (Low-cost Unmanned Combat Attack System), which have a price tag of approximately $35,000. A Tomahawk cruise missile, meanwhile, costs between $2 and $2.5 million. Compared to a swarm of drones, traditional air defences are economically unsustainable.

The rise of the counter drone

With drones increasingly deployed on battlefields, the defence industry has benefited from an urgent market for counter-drone technology, or C-UAS. These defence innovations require radar, radio frequency analysers, AI-driven jamming technology, interceptor drones, and kinetic interception and threat neutralization technology. 

The companies developing the multi-layered defence architectures of the future include: 

  • Dedrone (Axon Enterprise);

  • DroneShield;

  • RTX (Raytheon);

  • Lockheed Martin;

  • Northrop Grumman;

  • D-Fend Solutions; and

  • Ondas.

These firms are working to innovate technology. Belorde has cautioned that advancements in AI cut both ways for drone technology. The same technology that makes a counter drone more effective can also be leveraged to empower hostile actors.

With the 2026 World Cup happening in the U.S. amid a moment of heightened geopolitical tensions, counter drones could see a surge in investment. The 2026 world cup is a designated Nation Special Security Event (NSSE.) Transportation hubs and stadiums could become targets for hostile actors, underscoring the importance of counter drones.

Commercial drones find their moment

The value of the commercial drone market is surging. Currently valued at roughly $30 billion, it is expected to grow an additional $55 billion by 2030. The drone services market is also expected to see enormous growth by 2030. Currently also valued around $30 billion, drone services are expected to be worth north of $100 billion by the end of the decade.

A recent Drone Industry Global Drone Market Report noted that energy, construction, and agriculture sectors are making heavy use of commercial drones, but just about every major industry is leveraging their capabilities. 

In the webinar, Belorde discussed the Swiss company Cerity as a prime example of drones generating tangible operational value for the companies that deploy them. Verity’s drones weigh under two pounds and can take inventory with 99.9% accuracy, saving roughly $500,000 in working capital per site. They are estimated to shrink by $300,000.

Belorde also noted that companies like Gecko Robotics offer drones that can handle facility inspections for nuclear plants, chemical facilities, and offshare platforms. These inspections enable predictive maintenance and save companies millions in avoided downtime and repair costs.

Another industry that has embraced the power of the drone is entertainment. Drone shots have become a staple of film and television production, while the drone light show market is expected to reach a valuation of $6.52 billion by 2032. Some of this demand is driven by the need for an environmentally friendly alternative to fireworks. 

Regulatory tailwinds further empower drones

All around the globe, governments are altering regulations in an attempt to harness the innovation of drones. In the United States, the FAA is finalizing part 108 rules to enable routine beyond visual line-of-sight flights. New regulations are set to increase airspace visibility for large-scale commercial drone activity, and night and over-people flight approvals are expanding the urban use of drones. A ban of Chinese-made commercial drones is also setting the stage for domestic manufacturing to see major tailwinds.

Europe is developing the U-space drone traffic system and the EU Drone Strategy 2.0. These will build digital infrastructure and policy frameworks for commercial drone use. China, meanwhile is reforming its low-altitude airspace rules, while the U.K.’s Future of Flight Action Plan seeks to integrate drones and eVTOL aircraft into transport networks.

Investing in the drone future

The Vettafi Drone Index (DRONES) tracks the price movements of a portfolio of global companies with exposure to drones and UAVs. The index contains companies that are engaged in drone/UAV manufacturing and enabling technologies. To be eligible for the index, constituents must have a minimum thematic exposure as follows:

  • Constituent business operations must derive more than 20% of their revenues from drones/UAVs or enabling technologies.

  • Constituents must be a defense company with a division/program for R&D of drones/UAVs.

For more information about the VettaFi Drone Index (DRONES), click here. 

The bottom line

Drones and UAVs are poised to be an essential part of the future. In 2026, tailwinds from innovations and evolution in defence thinking, advancements in the commercial sector, and the onset of more friendly regulations around the world are setting the stage for massive growth for the drone industry. As defence budgets increase and AI enhances drone capabilities by the day, investors are looking at a multi-decade growth story.

As Belorde noted, “You cannot afford to lose the automation race.”

In mid-March, the Exchange conference offered a treasure trove of takeaways for asset managers. On the opening day of the conference, the Industry Conclave program featured six sessions meant to help issuers think about all aspects of product creation and growth.

The sessions included:

  • “Investment Strategies Powered by Adaptive AI,” which featured QuantumStreet AI’s CIO Chris Natividad
  • “Message Not Received: How to Market to the Busy Unresponsive Advisor,” featuring  Independent Advisor Alliance CMO David Buzo.
  • “Tracking the ETF Flight Path: Concept to Scale,” which featured VettaFi’s Chief Revenue Officer Sebastian Jakob and Director of Research Cinthia Murphy, as well as SS&C ALPS Advisor’s Paul Baiocchi and T. Rowe Price’s Christopher Murphy. 
  • “Taking Your ETF Strategy to Europe,” which featured a panel consisting of VettaFi’s Peter Diel, HANetf’s Josh Palmer, U.S. Bank’s Tony O’Brien, and Simmons and Simmons’ James Cullinane. 
  • “ETF Trends 2026: Alpha, Income & More — Sponsored by WE,” which featured J.P. Morgan’s Julie Abbett, American Century Investments’ Cleo Chang, Fidelity Investments’ Lubna Lundy, and moderator Roxanna Islam from VettaFi.
  • “Meet the ETF Press,” which featured With Intelligence’s Jenny Grybowski, Moby’s Thorton McEnery, Ignite’s Brian Ponte, CNBC’s Natalie Zhang, Investment News’ James Rodgers, and VettaFi’s Elle Caruso Fitzgerald.

Each session explored topics relevant to asset managers looking to create successful products.

Unpacking how AI is transforming investing

AI is creating massive shifts in the investment landscape, but it is also revolutionizing how investors invest. Natividad’s session explored how adaptive AI is increasingly important for financial professionals.

The data overload challenge

One of the biggest challenges facing asset managers is data overload. There’s a ton of data available, but determining what data is pertinent is a huge obstacle. “The data is absolutely exploding,” Natividad said. “90% of all of the data that’s ever been created has been created in the last two years.” Artificial intelligence can help financial professionals quickly slice and dice large and expanding data sets.

The key to capturing alpha, according to Natividad, is “combining structured data points with unstructured data points.” LLMs and AI were barely used five years ago, and now they are widely leveraged tools. Natividad thinks they will only continue to grow more sophisticated over time. “Making sure that you are utilizing a system that is able to capture this unstructured data that’s growing is tremendously important."

Faster risk detection through AI

One immediate case for AI is risk detection. According to Natividad, AI can interpret and rapidly understand granular data which can illuminate coming market challenges. With events in the Middle East affecting markets, a host of risks could arise at any moment. AI can be leveraged to detect risk on particular securities extremely quickly. “These systematic strategies are combining that unstructured data with structured data,” he explained.

Dealing with hallucinations

Of course, every tool has its limitations. AI has been plagued by hallucinations, and even though the technology is continuing to improve, users are encouraged to double check the information to make sure it is rooted in reality. According to Natividad, it is critical to train AI well and make sure that it is used in tandem with trained financial professionals to ensure accuracy. As more advancements are made in quantum computing, Natividad anticipates a reduction of hallucinations.

Marketing to advisors

The second talk of Exchange’s Industry conclave unpacked the various ways financial institutions are failing to connect to advisors. The solutions-oriented session also covered how issuers can remedy this problem and illustrated the most common pitfalls. 

To underline the absurdity of many modern marketing campaigns, Buzo compared them to meeting someone and then immediately leaning in for a kiss. Marketers must have a profound sense for the unspoken rules and take precaution not to violate them, but to earn trust instead.

Advisors face collective changes

The key disconnect is that marketers are not thinking about who they are talking to. “The advisor count is shrinking,” Buzo noted. With less advisors to target, the advisors who are around are being inundated with marketing. There is a 32% decrease predicted between now and 2035. 

Buzo also noted that their psychographics are shifting — running yesterday’s playbook could yield worse results. In 2035, Buzo expects there to be more AI assistants and an increasing focus on personalization. “Maybe now the gatekeeper is not going to be the person answering the phone,” he said. “It’s going to be AI.”

The 5 rules

Looking at the common breakdowns between issuer marketer and financial advisor, Buzo said there were five common missteps that all have solutions.

  1. You don’t know who you’re trying to reach. Who is your client? Who is the decision maker? What are their needs? 
  2. You are reaching them the wrong way. Everyone has different behavior patterns and preferences. “The fix here is to be intentional,” Buzo said.
  3. You are asking for too much too soon. Delivering value to someone before asking them for something can be a huge help to properly connect with someone.
  4. You are leading with the solution, not the problem. Many firms are eager to push their solutions, instead of communicating the problem you can help solve.
  5. You are prioritizing volume over quality. Account-based marketing (ABM) works when you start at a client level and work your way up, rather than starting at the top of the funnel and eventually drilling down. It can be advantageous to focus on a smaller slice of the overall pie and do it well, rather than sending thousands of emails.

Being on top of these rules can help create meaningful connections and drive better results. 

The ETF flight path

“Tracking the ETF Flight Path: Concept to scale” was an essential session that walked the audience through thinking about all steps in the product lifecycle before even embarking on an ETF journey. Aligning index design, product strategy, and distribution before day one can be the difference between a product that stalls out of the gate and a product that soars.

The evolving ETF market

At the top of the session, Cinthia Murphy explained that launching an ETF in 2026 is vastly different than it used to be. “Just ten years ago, there were just under 2,000 ETFs on the market. It took 24 years to get to 2,000 ETFs. It took us nine to get to 5000 ETFs.”

Anyone who wants to launch an ETF has several ways to go about it. White-labels have increased in popularity, mutual fund conversions are on the rise, and a 351 Exchange can transform an SMA into an ETF with relative ease. “In some ways, the ETF market is a bit of a paradox right now,” Baiocchi said, noting that though it’s easier than ever to launch an ETF, it’s more challenging than ever to differentiate yourself and find purchase in an increasingly crowded market. 

Good ETF ideas alone won’t cut it

“All of us in the room, we’ve all heard this story: A good idea is not good enough anymore,” Jakob said. He urged that issuers consider product, distribution, and PR in tandem ahead of product launch. “If you don’t have a distribution edge before you launch a product, you are likely going to lose.” 

Jakob underscored the value of using data to explore what investors are thinking about. “This is data that is so valuable from a product development perspective.” Understanding the appetite for a product before launch can help issuers have the right conversations and set their distribution arm up to effectively tell the product story. 

Chris Murphy articulated that, for many issuers, there is a simultaneous impulse to be patient and let a product succeed, alongside one to rush and push for success from the jump. Coming to market fast with a fresh idea is critical, but it also needs to be thoughtfully deployed and handled with care. “That patience has to be married to conviction,” he noted.

Differentiation through trust

“The way we as a company try to differentiate ourselves is by saying we don’t leave when the product is built. We try to grow the product when it is market,” Jakob said. 

Historically, index partners did most of their work prior to launch. Rebalancing is, of course, a thing that happens after launch. However, standing up the investment universe has traditionally put most of an index provider’s work early in the process. This can lead to a detachment from the product once it’s launched, even though index providers earn more as the products staked to their indices grow. 

Taking your ETF strategy to Europe

The next panel at the conclave helped illuminate the opportunities and challenges facing asset managers looking to expand into Europe. With Exchange Traded Products (ETPs) expanding rapidly, it is more important than ever for issuers to understand how to launch, manage, and trade a UCITS ETF. 

An overview of Europe

According to Diel, Europe has just passed the $3 trillion in AUM threshold. The continent saw $390 billion in inflows last year. Additionally, the number of ETF investors increased by 69%. “In the next five years, the market will explode in Europe. We’ll see double or even triple of the amount of investors,” Diel said, referring to a recent study.

“[It] feels very much like a pivot point in the industry,” O’Brien added. This pivot is largely due to the influx of retail investors. 

Accessing the European ETF market

To access the European market, issuers must overcome some legal and regulatory hurdles. Many will turn to white label platforms, like HANetf, to navigate regulatory challenges and  implement those strategies.  

According to Palmer, there are two other ways aside from white-labeling. The first one is to build your own platform. There can be challenges with this method, as it will require a great deal of ground work and mistakes are likely to happen. Another option is buying platforms. This turnkey solution has advantages, but it can be costly. “You can overpay,” Palmer noted.

Legal and regulatory

Cullinane dug into the legal and regulatory challenges, explaining that it can take four to six months to get a product approved by the central bank. “We’re constantly coming up with new ways to assist in this process,” he said, sharing that AI is deployed to track comments and see what solutions were made to similar comments. 

There are also critical decisions that issuers need to make. “The first and most important primary decision is to decide on your domicile,” Cullinane said. He shared that Ireland is the best choice as a domicile, given its generous tax laws, and he cautioned that “UCITS can be a minefield for new issuers.”

As with the ETF flight path session, the panel concurred that it is vital to think about distribution well in advance.“Where I see managers go wrong, sometimes, is they put distribution on the wrong finger,” Cullinane noted. 

The U.S. and Europe’s crosspollination of ideas and innovations

O’Brien reported that Europe and the U.S. have a rich history of sharing investment innovations. Then he cautioned that, “distribution in Europe is fundamentally different than in the United States.” Understanding the unique ways in which the European market is fragmented is important for issuers looking to find their audience.

Given the hurdles and challenges of learning about a new market environment, Palmer urged issuers to “do what you are good at” as they consider what kinds of strategies to bring abroad.

Women in ETFs explored the most important 2026 trends

The penultimate session, sponsored by Women in ETFs, focused on what the panel saw as the most important trends in 2026.

Alpha roars into the spotlight

Active ETFs are launching three times more frequently than passive ETFs, as investors look beyond simple beta. According to the panel, the "wrapper revolution" is democratizing ever more esoteric instruments like complex derivative income.

Asked about how to think about alpha for active management, Chang said it speaks to a desire investors have for products that go above and beyond. “We can all do a better job speaking to advisors and trying to achieve, and then aim to overachieve.”

Abbet added, “The conference is happening at an important time,” sharing that AI is impacting investing in huge ways, including helping to inject more juice and earn more alpha in asset management strategies. 

“Today it's about finding smarter, more consistent ways to deliver beyond traditional active management,” said Lundy. She shared that in today’s volatile market, “managing downside risk is almost more valuable than picking winning stocks.”

Mutual fund to ETF conversions to shake up the ETF space 

ETFs continue to gain popularity, outpacing mutual funds at a surprising rate. “There can be some meaningful benefits for clients. The best way I heard it described was as a slow-moving avalanche,” Lundy said. Despite everything else happening in the market, the big pivot towards ETFs might be one of the most important stories of 2026.

Abbott offered that “it forces traditional active managers to look at the ETF wrapper.”

Digital assets a key 2026 ETF story

Digital assets continue to make headway, and the panel sees that trend as likely to persist. Lundy noted that there is a huge demand for more digital asset diversification, which could lead to more investors accessing digital assets beyond bitcoin and etherium. 

Covered calls and defined outcomes

Abbott touched on covered calls and defined outcome ETFs, noting that investors are very focused on yields, sometimes even at the expense of total return. “I think these strategies are discovering unique ways to get income.” These products are popular, but Abbott cautioned that investors need to think about what they are actually looking for in their portfolios.

Thematics

Islam noted that “fairweather fans” exist in some crypto and thematic strategies. These investors will jump in as the market is going up but are quick to abandon products when the market turns sour.

“The challenge is volatility,” Lundy said. High-beta investments in emerging technologies like AI and other industries are interesting to advisors, but they tend to be more satellite than core positions. “The ETF wrapper has made it easier to implement these strategies,” Ludy explained. “These strategies require thoughtful positioning and risk management.”

Product differentiation remains top of mind

With 1000 products launched in 2025 and 300 new issuers, standing out is more challenging than ever. “There are more ETFs than publicly listed stocks,” Lundy said. ”In such a crowded space, [advisors] are looking for brands they can trust.”

Abbott noted that “performance is going to be a key differentiator.”

AI uncertainty and geopolitical stress

The markets in 2026 have been marked by uncertainty on a number of fronts. AI threatens to crack, but Lundy noted that it hasn’t yet. “I do think there is a broadening of market leadership happening in the markets.” The picture is further complicated by ongoing geopolitical tensions, which add some degree of uncertainty and chaos into the market environment.

Chang offered that “the way we think about 2026 and beyond is really simple: keep doing the things we do.” She stressed delivering on your promises and never surprising clients. “That’s one of the most important things for asset managers — to be very clear and stick to your knitting.”

ETF press takes the spotlight

The final panel of the industry conclave focused on the ETF media. As issuers try to help their products stand out, media coverage can be a differentiator. Knowing what the press is looking for and why they choose to cover one product launch over another is vital. 

Chase Kosinski, account executive at Craft & Capital, moderated the panel, which unpacked how the ETF media thinks about approaching stories.

What determines coverage?

The panel featured a host of different responses to the fundamental question of what determines coverage, speaking to the diversity of the media ecosystem. Ponte shared, “A lot of times it comes down to interest, it comes down to buzz.”

According to Grybowski, With Intelligence considers both their own ability to contextualize and whether or not it is proprietary. If others aren’t covering it, it's an interesting opportunity that can help their outlet stand out and fill in a niche. If everyone else is already chasing the story, it could be less compelling.

Rodgers noted that timing also matters, as there are breaking daily stories that have to be juggled against other things. If you launch happens on a busy news day, it could be buried.

In media, no rest

For some outlets, coverage has utility beyond simply sharing the story. Caruso Fitzgerald noted that VettaFi, as a differentiated index provider with a media arm, leverages their data to determine what investors are interested in. She also articulated an awareness of today’s unique media environment. “There is such fragmentation in the ways that people are getting their news today. We want to meet them where they are.”

The panel concurred, with Zhang saying social media is more important than ever, and that many investors get their news from what’s trending rather than seeking it out on a particular website.

AI and media

AI remained a hot-button topic, even in the media panel, where Rodgers said, “On one hand, it's the biggest existential threat to journalism as we know. On the other hand, it's a tool we have to use.” He doubled down on the importance of having "a human touch,” noting that nobody is interested in reading something that hasn’t touched human hands.

Grybowski noted that With Intelligence uses the tool to sort through filings, adding that, “journalists are becoming more data gatherers.”

GEO and AEO are also leaving a mark and determining how outlets think about presenting stories. “Creating data driven stories with a lot of numbers are more likely to be picked up by AI and used in their responses,” Caruso Fitzgerald added. 

Filings vs. Launches

Filings tend to generate more coverage than launches, despite not being actionable for readers. Additionally, for PR, SEC regulations mean that issuers can’t discuss filings, but they can discuss launches. Grybowski shared that, “none of us are out for a gotcha moment. We’re all very aware of the quiet period.”

Some outlets push against the norm and prefer to cover launches over filings. “Our audience is financial advisors and investors, and we find that announcing new funds is most effective on launch day — not before,” Fitzgerald Caruso said. "Waiting for launches helps ETF Trends inform how a particular fund that is currently investable can help investors overcome a problem."

Closing thoughts

As issuers build the innovative products and solutions of tomorrow, Exchange’s industry conclave highlighted the importance of thorough research, preparation, and strategy. With the ETF space becoming increasingly crowded, the products that rise to the top will be the ones that take the time and spend the energy to position themselves for success.

Some key takeaways included:

  • Have a plan for how you will navigate the data overload.
  • When you market to investors, ensure that you are meeting them where they are at and solving their actual problems — not simply pushing a product.
  • As you plan a launch, ensure you have the right partners to help you set your distribution up for success.
  • Take advantage of expanding markets, but make sure you have a plan and that you don’t lose sight of what your firm does best.
  • Keep an eye on the stories driving the market and make sure you are prepared for how investors could react to your product.
  • Build products with a plan for how you want them to be covered by the ETF media.

Interested in learning more about how you can help increase your product’s chance of success? Talk to our team.

For issuers, launching an ETF is more challenging than ever. VettaFi’s Chief Revenue Officer Sebastian Jakob and Director of Research Cinthia Murphy joined SS&C ALPS Advisor’s Paul Baiocchi and T. Rowe Price’s Christopher Murphy for the session “Tracking the ETF Flight Path: Concept to scale. The session explored how to align index design, product strategy, and distribution before day one.

The changing ETF market

Cinthia Murphy opened by telling the audience that launching an ETF in 2026 is a completely different ballgame than it used to be. “The market get smore crowded, there are more brands in there.” Murphy added, “Just ten years ago, there were just under 2,000 ETFs on the market. It took 24 years to get to 2000 ETFs. It took us 9 to get to 5000 ETFs.”

“In some ways, the ETF market is a bit of a paradox right now,” Baiocchi said. There isn’t much white space or opportunity to differentiate yourself. “At the same time, there are more options than there ever have been to get on the ETF highway.” Anyone who wants to launch an ETF has several ways to go about it: go out to a white-label provider, convert a mutual fund, or convert an SMA via a 351 Exchange into your own ETF. 

Expanding value proposition and brand presence

Chris Murphy shared his experience coming into the ETF market. “The first ten ETFs we launched were mirrored against mutual funds,” he shared. They were essentially clones of strategies T. Rowe Price already had, but since then, their ETFs have been wholly distinct. After some initial semi-transparent products, they have pivoted to fully transparent products. As the industry evolves, Murphy noted that issuers are also evolving their thinking and finding better ways to help advisors.  

Good ETF ideas are no longer enough

“All of us in the room, we’ve all heard this story: A good idea is not good enough anymore,” Jakob said. Product, distribution, and PR need to work closely together before a product launch, which doesn’t happen often enough in today’s market. “If you don’t have a distribution edge before you launch a product, you are likely going to lose.” He shared that VettaFi has a lot of data on what investors are thinking. “This is data that is so valuable from a product development perspective,” Jakob said, noting that behavioral data can be a huge edge as you work to bring a product to market. Understanding the audience for the product before you even develop the product is critical. “This is what differentiates the wheat from the chaff.”

Baiocchi added, “The truth is that it’s as difficult as it’s ever been to launch an ETF, but you have to take steps to ensure success.” This means determining whether there’s appetite for a particular product, having conversations, and ensuring that distribution forces know how to tell the product’s story is key. “You have to ensure that everything is operating and optimized.”

Playing the long game

Chris Murphy articulated the tension between needing to be patient and also being rushed at the same time. You need to come to market fast, but you also need to button everything up and put it together thoughtfully. Some funds can be slow-growing, and tides can take a long time to mature. “That patience has to be married to conviction.”

He also talked about what it means to launch a mutual fund vs and ETF. Shifting from a mutual fund provider to an ETF provider requires being reintroduced. “You have to do a lot of rebranding,” he said, adding, “ You have to make the benefits of active management tangible.” He pointed to sector investing and classification as a particular opportunity for active managers. Technology is one sector where an active manager’s intervention can provide tangible value.

Trust is the currency of the ETF industry

Asked about partnerships and trust, Jakob noted that “The way we as a company try to differentiate ourselves is by saying we don’t leave when the product is built. We try to grow the product when it is market.” Index providers tend to do a lot of work on the early side of a product, pre-launch. There is ongoing work, but most of it is at the beginning. However, Jakob noted that though a majority of the work happens early, “you make more money as the product gets to scale.” He encouraged issuers to make the index provider work for their fees.

VettaFi provides behavioral data, writes content, and helps the products staked in its indices reach the next milestone.

Jakob also noted that many newer firms have small marketing budgets and can easily blow them all on awareness campaigns. Ignoring the funnel, however, and focusing on advisors that are likely to be interested in a product can be more successful. “That’s the kind of advice and consulting and data that we show up with to build that trust.”

Understanding your strengths

For issuers, it is important to understand your strengths. “You need to be clear-eyed about what it is you are good at,” Baiocchi said. Understanding what you can do at the margins that differentiates you is important. “The way you go about it just can’t be product first.”

Has AI changed things for ETF issuers?

Asked how AI has changed things, Baiocchi said the obvious low-hanging fruit is crafting emails. “What we’ve seen evolve is building a dossier, a book report if you will, on an advisor.” It can take a long time to find all the information about a specific firm, but AI tools can help pull it together faster.

Jakob noted that it is increasingly important to use behavioral data in distribution. “That behavioral data is getting better and better with AI.” But there are also things happening on the product creation side. In the past, a spark of an idea would lead to research and work, while today that initial spark can be sent to an AI to create something half-baked.” That half-baked idea is farther along, much faster than a manual creation. 

This article was first published on ETF Trends on March 15th, 2026.

Thematic ETFs might have fallen somewhat out of favor in the era of nonstop megacap growth, but as that era comes to a close, investors should explore their options. As thematics become more relevant, identifying the themes that will shape the future is critical. In the recent Midyear Outlook Symposium, Amplify’s CEO Christian Magoon and Xtrackers’ Head of DWS Research Institute Robert Bush shared their thoughts on the comeback of thematic ETFs. TMX VettaFi’s Kirsten Chang moderated the discussion.

Christian Magoon

Amplify’s Christian Magoon

Do call it a comeback

“Thematic is back,” Magoon said, noting that eight of Amplify’s thematic ETFs have outperformed the S&P 500. “It is time for advisors to take a look at it and add alpha to their broad-based investment portfolios.”

Thematic ETFs benefit from the ability to reinvent themselves. In 2021, cannabis ETFs had a brief moment, but other themes have since emerged, including AI.

How much of your portfolio should go to thematic ETFs?

Magoon thinks 5%-10% of portfolio allocations is a sweet spot for thematic ETFs and that different themes can play different roles in a portfolio. “There are some themes that are more of a trading opportunity than a long-term hold.” Time horizon is an important consideration for investors. Some trends could be short term and some could matter a great deal in the future.

Bush noted that there are thematic ideas that can span multiple sectors and some that can be incredibly niche. “You have to think about the economy of tomorrow,” he said.

Tales from the crypto

Crypto is moving quickly and garnering attention from more institutional investors. “Year to date, a spot bitcoin ETF is the 4th-highest inflow ETF right now,” Magoon said. He noted the Amplify Transformational Data Sharing ETF (BLOK) has been helpful for investors looking for exposure. Crypto volatility remains an issue, but has come down as more institutional investors have entered the space. It remains uncorrelated, and a potentially useful diversifier. BLOK has averaged more than 16% per year returns, according to Magoon.

The world is a (video game) stage, and we are merely players

The Amplify Video Game Leaders ETF (GAMR) tracks the VettaFi Video Game Leader Index. GAMR is a terrific example of an attempt to cover a growing theme. “Three billion people game. The most popular sport is soccer, and only 200 [million]or 300 million people engage with soccer,” said Magoon.

GAMR has diverse exposure throughout the entire gaming ecosystem, including everything from mobile developers to the companies that make computer chips.

Given the importance of gaming globally and culturally, the video game ecosystem could provide investors with opportunities.

Artificial intelligence discussion closes out midyear symposium

Thematic ETFs are making a comeback, and one theme in particular dominates conversation. Artificial Intelligence remains top of mind for investors. TMX VettaFi’s Zeno Mercer and Todd Rosenbluth discussed the disruptive technology.

Mercer kicked things off by taking issue with the term ‘artificial intelligence,’ noting, “Its not artificial anymore, it’s real.” He shared his preference for the term “digital intelligence.”

Zeno Mercer and Todd discuss Artificial Intelligence

Asked about the recent 2025 advancements in the AI field, Mercer said open source intelligence has been accelerating. “If you look forward on a five year horizon,” Mercer said, “individuals and institutions will have more options.” 

Artificial intelligence continues to generate interest

In a poll of attendees, two thirds saw artificial intelligence as a topic “worth learning more about” while 11% said it was overhyped. “I’ve been using AI for over a decade now, it was a very slow ramp up to get to where we are today,” Mercer shared. “Now, I do feel like it's underappreciated.” As such, Mercer sees AI as becoming more nuanced and personalized instead of relying on broader categorizations. 

Mercer envisions artificial intelligence as becoming better with data and increasingly personalized to the user experience. Right now, artificial intelligence leverages broad demographic decisions. Basically, a man in his thirties might get fed information or opportunities based on things other men in their thirties enjoy. But soon AI will more accurately see who an individual is. Consequently, it will better be able to comport to their needs.

I THNQ, therefore I am

The ROBO Global Artificial Intelligence ETF (THNQ) has two thirds of its exposure to AI infrastructure. “AI is increasingly going to be tethered to interacting in the real world,” said Mercer. He noted robots and autonomous vehicles require strong connectivity because they act independently. 

Asked if there was an interesting recent company that has been added to the roster, Mercer pointed to Tempus AI. That company aims to create an “AI healthcare quarterback.” Accordingly, Mercer sees it as an exciting example of  how AI can be used to improve both clinical care as well as research.

Interested in learning more about how VettaFi can help you build a thematic index? Reach out to our experts.

VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for GAMR and THNQ, for which it receives an index licensing fee. However, GAMR and THNQ are not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GAMR and THNQ.

  • From design studios to construction sites to building operations, AI and robotics are driving a fundamental evolution of the real estate industry.
  • At construction sites, AI and robotics are beginning to transform building processes that are labor-intensive and dangerous.
  • After construction, AI continues to add value to a building’s operational life through energy management, security applications and enabling “smart buildings.”

Artificial intelligence and robotics are fundamentally reshaping the real estate industry value chain, from design and construction to operations and usage patterns. This transformation represents an opportunity for investors seeking exposure to the convergence of technology and physical assets.

This report examines how AI is impacting real estate from two crucial perspectives: 1) physical world transformation and automation; and 2) AI enablers and applications. Public companies discussed are constituents of the ROBO Global Robotics and Automation Index (ROBO) and/or the ROBO Global Artificial Intelligence Index (THNQ).

AI in design and planning for real estate

AI is revolutionizing architectural design, space utilization, energy efficiency, materials science simulation and optimization, and urban planning through advanced simulation capabilities. Urban planners and architects globally are using AI-based simulation to create “digital twins” of cities. This allows them to test how design choices affect traffic flow, sunlight, wind, and energy usage before anything is built.

For example, Autodesk’s (ADSK) Oslo-based Spacemaker platform leverages cloud AI for optimizing site plans for neighborhoods and buildings. Architects and developers are able to “test design concepts in minutes.” This generative AI approach helps professionals make better early-stage design decisions and maximize long-term project sustainability?.

By processing massive datasets (geospatial data, climate patterns, zoning rules, etc.), AI can quickly and efficiently uncover design solutions that balance aesthetics, cost, and environmental goals. AI-backed approaches far surpass manual methods.

Example AI & robotics companies enhancing real estate design and planning

AI and robotics transforming construction

At the construction site itself, AI and robotics are beginning to dramatically transform building processes that are labor-intensive and dangerous. We are seeing the emergence of semiautonomous and autonomous machines that can augment or even replace certain onsite activities. Drones and agile ground robots, equipped with AI, are handling tasks like surveying, site inspection, and progress monitoring.

Beyond inspection, AI-enabled robots are directly performing construction tasks. Autonomous or semiautonomous heavy equipment is a fast-evolving reality. Bulldozers, excavators, and cranes are being outfitted with AI guidance systems to perform groundwork with minimal human input.

ROBO constituents transforming construction

Building operations, analytics, and energy management

After construction is complete, AI continues to add value over a building’s operational life. Modern building management systems (BMS) are incorporating AI algorithms to turn ordinary facilities into “smart buildings.” Sensors and IoT devices embedded throughout a building can feed real-time data on occupancy, temperature, air quality, lighting levels, equipment status, and more into cloud-based AI platforms.

For example, companies like Samsara (IOT) provide a Connected Operations Cloud that allows organizations with physical assets (buildings, factories, vehicle fleets) to harness IoT data for actionable insights.

Safety and security are another major aspect of building operations AI is enhancing. Traditional security cameras produce a flood of footage that is impractical for humans to monitor in real time. AI computer vision now can analyze video feeds for threats or issues. Specialized vision-processing chips from companies like Ambarella (AMBA) enable cameras to perform on-device analytics with deep learning.

AI is fundamentally altering how real estate assets are valued, marketed, used, and repurposed. The traditional property valuation process relied heavily on human appraisers applying subjective judgments and limited sales comparisons. Today, machine learning algorithms can analyze thousands of property attributes and market factors simultaneously to generate more accurate, objective valuations.

AI is also playing a significant role in the drive for energy efficiency and sustainability given how much energy buildings consume. Almost a fifth of total global energy consumption is used for heating, cooling, and lighting buildings. Industrial companies like Emerson Electric (EMR) and Schneider Electric (SU) are focused on energy management for buildings.

Companies reshaping building operations, analytics and energy management

Impacts of real estate usage evolving

Perhaps the most far-reaching impacts of AI on real estate will come from the changing ways we use physical space as AI-driven systems become ubiquitous. One major example is the advent of autonomous vehicles (AVs) and delivery drones. These are poised to reshape urban infrastructure and land use.

If self-driving cars and trucks become mainstream in the coming decades, cities may need far fewer parking garages and surface lots. AVs, especially when used in fleets or ride-sharing services, can relocate or continue circulating instead of parking.

Over time, drone pickup and drop-offs will become more common. An example is private company Zipline’s agreement with Walmart (WMT) for drone deliveries near Dallas.

Conclusion and outlook

From design studios to construction sites to the daily management of buildings, AI is driving a fundamental evolution of the real estate industry on a global scale. The themes outlined — smarter design, new materials, robotic construction, intelligent operations, energy optimization, and evolving space usage — are all interconnected pieces of a decades-long transformation. Crucially, these are long-term, secular trends rather than passing fads.

To learn more about AI, view our on-demand webcast: “Investing in AI: Separating Hype from Reality in the AI Revolution.”

ROBO is the underlying index for the ROBO Global Robotics & Automation ETF (ROBO). THNQ is the underlying index for the ROBO Global Artificial Intelligence ETF (THNQ).

This article was originally published May 1st, 2025 on ETF Trends.

Understand the post-2025 landscape: See how emerging policies—from the Biden administration’s AI Executive Order to shifting immigration rules—may accelerate robotics and AI adoption across U.S. industries.

Pinpoint key sectors under pressure: Discover which areas (construction, manufacturing, agriculture, logistics) face intensifying labor shortages and how automation can fill the gaps.

Forecast the next automation cycle: Identify the policy tensions and structural reforms that could set off a sustained wave of robotics and AI implementation, reshaping supply chains and operational models.

Develop forward-looking strategies: Learn practical ways to spot early movers, broaden your focus beyond mega-cap names, and stay ahead as these technologies reshape the economic landscape.

Looking ahead to 2025, American industry stands at a crossroads, with a policy landscape that appears increasingly favorable for robotics, automation, and AI. The groundwork laid by initiatives like the Biden administration’s AI Executive Order—encouraging broad adoption of AI across government—suggests that further policy shifts could accelerate these trends. At the same time, structural challenges and potential reforms across areas like trade and immigration are converging, creating both obstacles and unprecedented opportunities. 

As domestic manufacturing regains focus and interest rates trend lower, the stage is set for one of the most significant automation cycles in recent memory. Thus, we expect to see a reshaping supply chains, labor practices, and competitive dynamics as American businesses adapt to a new era.

Pent-up capacity & labor constraints:

Manufacturing, construction, and logistics sectors have long awaited greater policy clarity and reduced regulatory friction. Add to this the possibility of new tariffs and potential deportation of undocumented immigrants—who currently comprise a substantial portion of the workforce in agriculture, construction, and processing facilities—and you have a scenario where labor shortages are likely to intensify. Under such conditions, robotics and AI solutions become not only economically attractive, but strategically essential.

I recently discussed these “less obvious” Trump trades on Bloomberg News Network (BNN). While Bitcoin’s recent price appreciation has drawn early attention, the more sustained and impactful story may be in automation and robotics. Watch the segment here.

Key sectors for automation adoption:

  • Construction & manufacturing: These industries already face a tight labor market. If immigration policies further restrict the labor pool, the incentive to invest in robotics and AI-driven machinery becomes even stronger.
  • Agriculture & food processing: Approximately 42% of U.S. farmworkers are undocumented. Any significant reduction in this workforce could disrupt entire supply chains. Advanced harvesting robots, autonomous tractors, and AI-assisted processing lines will help maintain efficiency and output.
  • Logistics & warehousing: A push toward domestic production—coupled with a diminished labor force—intensifies the need for automated distribution centers, AI-driven inventory management, and autonomous logistics solutions.

Policy tensions & possible paths forward:

There’s a clear tension between policies aimed at reshoring manufacturing, reducing inflation, and constraining certain labor pools. While proposals like streamlined green cards for STEM graduates might fill some specialized roles, they do not solve the larger labor gap in more labor-intensive sectors. Some form of vetted, solution-oriented immigration policy could help, but in its absence, robotics and AI stand ready to bridge the gap.

A potential automation supercycle:

These developments could catalyze a long-anticipated “supercycle” of automation. TSMC’s Fab 21 in Arizona has exceeded yield expectations, demonstrating the viability of high-tech manufacturing in the U.S. I discussed Fab 21 in more detail on Schwab Network TV. This success, paired with the potential policy shifts, may encourage further onshore development and larger-scale adoption of robotics and AI-driven production lines.

Consider Foxconn (Hon Hai), which reported strong results and significant progress in the AI server market. In partnership with NVIDIA, Foxconn is developing substantial server manufacturing capacity in Mexico, diversifying its operations and tapping into new growth areas. Amazon, meanwhile, is advancing its own AI chip initiatives to reduce dependency on a single vendor. Similarly, ASML projects robust long-term growth—despite near-term regulatory hurdles—anticipating a trillion-dollar chip market by 2030. Collectively, these moves suggest that value creation will extend beyond a handful of mega-cap names to a more diverse range of ecosystem players.

ROBO and THNQ: Capturing the full opportunity set:

We cover these two areas of physical automation and artificial intelligence, which are poised to benefit from ongoing policy shifts and industry transformations. The ROBO Global Robotics & Automation Index (ROBO) and the ROBO Global Artificial Intelligence Index (THNQ) track a broad range of participants in these ecosystems—integrators, component suppliers, software platforms, and enabling technologies—rather than concentrating on a few dominant names. With lower interest rates and the potential for increased M&A activity on the horizon, smaller and mid-cap innovators included in these indices stand to gain from growth and consolidation opportunities across the sector.

Importantly, this narrative goes well beyond the immediate headlines surrounding cryptocurrency rallies or the dominance of a handful of high-profile AI companies. The deeper, more enduring story into 2025 and beyond is the structural, economy-wide embrace of robotics and AI. By examining the full spectrum of companies represented in ROBO and THNQ, we can identify how these sweeping shifts in labor markets, regulatory environments, and supply chains are creating a lasting foundation for one of the most significant technological growth themes of the coming decade.

This article was originally published December 11th, 2024 on ETF Trends.

VettaFi recently sat down with Morten Paulsen, head of research for robotics & machinery at CLSA, to discuss the transition of physical AI into a tech-driven industrial up-cycle. Paulsen projects that persistent U.S. labor shortages will drive domestic robot shipments toward a historical high of 40,000 units in 2026.

Paulsen is a strategic advisor for VettaFi’s ROBO Global Indexes, which underlie the ROBO Global Artificial Intelligence ETF (THNQ) and the ROBO Global Robotics and Automation Index ETF (ROBO).

VettaFi: You’ve been covering industrial automation for decades and have unique visibility into different markets. Here in the U.S., there’s renewed excitement around new robotic form factors and physical AI. Are you seeing that same enthusiasm in Japan and China?

Paulsen: Yes, when we look at robots globally, “Physical AI” was clearly the big buzzword in 2025. It started at CES in January when Jensen Huang named robotics as an enabler of AI in the physical world. Humanoid robot builders were very quick to point out that their robots were the answer to that vision.

I think it changed a bit in October 2025 when SoftBank Group acquired ABB Robotics for $5.4 billion. That was a turning point where the broader market realized physical AI wasn’t limited to robots with a human form factor, but applied to a much broader range of automation equipment. That triggered a rally in other industrial robotic names in Japan — Fanuc and Yaskawa, for example.

Regarding investor interest in Asia… In China, Hong Kong, and Singapore, the investor base has been very focused on the humanoid form factor, whereas I see less interest in that specifically in Japan. Japan, the U.S., and Europe are more similar in that sense.

VettaFi: What are your thoughts on Japan’s industrial and robotics adoption and usage of artificial intelligence?

Paulsen: AI has the power to make robot applications more powerful, and I also think that we can start to see the development of new business models. 

When it comes to developments — and underappreciated developments heading into 2026 — I do think that we’re going to see more focus on the robot hand, especially things like tactile sensing. If you look at the robots right now, we have machine vision that lets robots “see.” With cobots, the robots have been enabled to work in proximity to humans. And then we have AMRs (autonomous mobile robots) that give the robots mobility. Also, LLMs have had an impact on the robot’s ability to understand human language and so on. But still, the missing link here is to get hands that are working properly.

VettaFi: You’ve presented data showing the U.S. could face a shortfall of 1.5 to 3.9 million manufacturing workers due to demographics. Your research also found a 94% correlation between job openings and robot installations the following year. Has that correlation re-established itself post-COVID, and what does it imply for U.S. automation demand over the next two to three years?

Paulsen: I continue to believe that the labor shortage is going to be one of the fundamental underlying drivers for robotics and automation demand. Regarding the correlation between job openings and robot shipments [that I’ve highlighted in my research], what we saw now in the temporary numbers in 2025 is that robot shipments are still slightly under-indexed compared to the labor shortage that we saw in 2024, but the big gap that we saw during COVID has narrowed.

Job openings in manufacturing have also come down, but we’re still looking at a pretty big shortage. On average in 2025, we’re looking at about 400,000 job openings in manufacturing. If this historical link holds, we should see about 40,000 robots shipped in the U.S. in 2026. That would be very close to an all-time historical high. It would indicate about 30% year-over-year growth. 

VettaFi: China has the highest robot density globally and is the only country with an operating robot population exceeding one million units. What do you think about China as both the largest demand market and an increasingly formidable competitive threat to incumbents in traditional industrial robotics?

Paulsen: China as an end market performed a lot better than initially expected in 2025. The automotive and electronics sectors remained very active. With the Trump tariffs — many of those specifically targeting China — we were more worried at the beginning of the year, but China held up incredibly well. One reason for that is replacement demand, but also because they were still investing in new automotive technologies. I think it’s worth highlighting that foreign companies actually reported fairly good growth rates in China in 2025, including FANUC and Yaskawa.

Regarding Chinese robot makers looking to increase abroad and the extent they represent a competitive threat… I do think that they are a competitive threat within China, but as we can see on the growth rates in ’25, the foreign companies still have a lot to offer.

Chinese robot companies started to show up at trade shows in Europe and Japan [in 2025]. But so far, there has been a limited market impact. I do think that could change, but it’s not an easy market to break into. You have high entry barriers, especially on the distribution side in terms of safety certifications. It’s usually not enough just to have a low price point; the quality requirements are very, very high. Manufacturers would be very cautious about picking systems. Automation equipment is part of a bigger system, and the system is only as strong as the weakest link.

VettaFi: What trends or developments in robotics and industrial automation is the market underappreciating?

Paulsen: I think it is more interesting to talk about robots doing things humans can’t replicate — looking beyond what humans can do. [One example is] nano-robots that can go into the body. That is still in the research phase, but really interesting. 

We can also think of robot types that don’t exist. Why shouldn’t we put effort into making a, let’s say, rare earth mining robot? Everyone can instantly see that could be a very good idea. But we should start to think about what is needed — the best form factor, mechanical structure, and software package needed to move into these new areas. Once you start with that way of thinking, it’s almost unlimited where robots can go.

VettaFi: Is there anything else financial advisors should know?

Morten Paulsen: I did a presentation a year ago where I had predictions on ’25. I think accountability is important if I make a prediction — I like to look back and see what went wrong and right. A year ago, I presented a fairly optimistic view on the cycle. ’25 turned out to be a bit more volatile than that.

It started off very well — manufacturing PMIs above 50 in the first quarter — but then the second quarter came with a lot of volatility with “Liberation Day,” which brought a lot of uncertainty. But then things picked up in the third and the fourth quarter. One year ago, I said we were about to enter an up-cycle. Today, I would say we are already in an up-cycle.

That was largely ignored by the market, and it was really the thematic angle that brought investors back. But from a cyclical perspective, I do believe we are in an up-cycle. I believe this initially is going to be a tech-driven up-cycle, but I do expect automotive capex to come back towards the end of the year. We are going into what we can look back at as a pretty long up-cycle, but at a slower pace than the “sugar rush” after COVID in ’21 and ’22.

This article was originally published January 26th, 2026 on ETF Trends.

Over 500 million years ago, life on Earth underwent a dramatic transformation. Over a geologically brief period, the diversity of complex organisms exploded from simple, soft-bodied creatures into nearly every biological creature we know today. Scientists call this the Cambrian Explosion. The catalyst? A convergence of environmental, genetic, and ecological factors suddenly made rapid diversification not just possible, but inevitable. We are witnessing something remarkably similar in robotics and automation today.

The Cambrian period saw the emergence of eyes, limbs, and complex nervous systems in parallel across multiple lineages. Similarly, the robotics industry is experiencing a simultaneous evolution of hardware capabilities, software intelligence, and system-level coordination. Dexterous hands, new form factors, better edge AI models, and improved simulation environments are all converging at once. The total addressable market for robotics is expanding in lockstep with AI advancements, with new categories of tasks that machines can and will perform.

The convergence: Why the TAM is expanding

The parallel to biological evolution runs deeper than mere metaphor. In the Cambrian period, the development of eyes triggered an evolutionary arms race that accelerated innovation across entire ecosystems. Similarly, advances in AI are reshaping the entire landscape of what automation can address.

At the task level, we are seeing hardware improvements like dexterous manipulation, improved sensors, and new mobility form factors enable robots to perform work that was previously impossible. At the system level, better orchestration through AI allows fleets of robots, drones, and automated systems to coordinate in ways that multiply their collective impact. Coding agents and reasoning models are acting as force multipliers for development teams. Longer context windows and improved inference allow AI systems to handle more complex, longer-duration tasks with higher reliability.

This results in a fundamental expansion of the addressable market. Robotics is no longer confined to structured factory floors. It is moving into warehouses, homes, airspace, and infrastructure. And as AI continues to improve, the boundary of what robots can do will keep pushing outward.

2025: The year robotics found its footing

The ROBO Global Robotics and Automation Index (ROBO), long considered the benchmark for the robotics industry since its launch as the world’s first strategy tracking the space in 2013, posted 24% annual performance for 2025. It’s climbing towards previous highs but at much more muted valuations, still, as both earnings and sales growth have outpaced valuations for the space. More importantly, the robotics market exited 2025 with real velocity. That came after a multi-year flat-to-down cycle with revenue growth, profitability, and industry excitement all improving simultaneously, benefiting from strengthening end markets and renewed capital expenditure cycles.

2026 Outlook: Physical AI takes center stage

At risk of sounding like a broken record, we believe physical AI is poised to take off in 2026.

The benefits of increased automation extend well beyond industrial productivity, though we often fail to discuss them. At home, AI agents are beginning to handle the small stuff that eats our days: managing calendars, clearing digital clutter, automating repetitive tasks. We have not yet fully experienced the deflationary effects of automated production and movement of goods, whether on the ground or in the skies. Drones, for example, are increasingly used not just for monitoring and improving operations, but for handling tasks themselves. 

Robotics is also expected to become a central focus for national security. The United States is anticipated to introduce a National Robotics Strategy, recognizing that leadership in automation is as strategically important as leadership in semiconductors or AI.

And with every technological leap comes new challenges and threats. As drones proliferate across delivery, personal use, and infrastructure monitoring, we are simultaneously seeing them deployed in conflict zones like Ukraine. Both “good and bad agents” use them for functional operations as well as offence and defense applications. Increased autonomy demands increased protection using similar, if not more advanced technologies.

New ROBO addition spotlight: Ondas, Inc.

The reasons discussed above, along with fundamental analysis of technology and market leadership, led to the addition of Ondas, Inc. to the ROBO Global Robotics and Automation Index (ROBO) at the Q4 2025 rebalance. Recently rebranded from Ondas Holdings, the company is a diversified autonomous systems player spanning air, ground, and communications. Its applications range from railroad monitoring to counter-UAV defense to weapons demining operations. It has demonstrated vision and disciplined execution through strategic M&A, including the Roboteam acquisition that expanded its ground robotics capabilities in conflict zones and beyond. 

Major catalysts lie ahead as the industry sees massive growth and investment globally: World Cup and Olympics security, airport and stadium protection, government facilities and beyond. Most recently in 2026, post index addition, Ondas, Inc. landed a multi-year autonomous border protection contract for the Israeli border. 

Ondas represents a prime example of new modalities becoming the tip of the spear for the next wave of automation investment, spanning key underlying technologies across actuation and computer vision to industrial manufacturing and diverse real-world applications.

Looking ahead

As we enter 2026, AI infrastructure spending should remain robust while physical AI and edge deployments open new growth vectors beyond the datacenter. Reshoring and industrial focus are returning in force. Companies operating at the intersection of physics and intelligence will excel in the economics of physics, which is all about pushing the boundaries of what can be built, moved, and transformed in the physical world. The Cambrian Explosion created entirely new ways of existing. The same will be true for the explosion of robotics and AI.

ROBO is the underlying index for the ROBO Global Robotics & Automation ETF (ROBO), the L&G ROBO Global Robotics and Automation UCITS ETF (ROBO.LN), and the Global X ROBO Global Robotics & Automation ETF (ROBO.AU).

This article was originally published January 13th, 2026 on ETF Trends.

The healthcare sector is on the cusp of a transformative period, fueled by technological advancements, shifting demographics, and a growing emphasis on controlling continuously increasing costs. As we navigate the post-pandemic landscape, the outlook for the industry remains cautiously optimistic, with several key trends shaping its future. This article focuses on those developments, highlighting key drivers of growth and how the Healthcare Technology and Innovation (HTEC) index is strategically positioned to capitalize on these emerging opportunities.

Technological advancements and precision medicine

The shift towards personalized care

The industry is increasingly embracing precision medicine, a transformative approach that tailors treatments to individual patients rather than relying on a one-size-fits-all model. This shift is largely driven by:

  • Genomics: Advances in genomic sequencing enable a deeper understanding of genetic predispositions to diseases, allowing for more targeted therapies.
  • Artificial intelligence (AI): AI algorithms analyze vast datasets to identify patterns and predict treatment outcomes, expediting the drug discovery process.
  • In silico drug development: Testing drugs through computer simulations accelerates clinical stages, reducing time and costs associated with traditional lab testing.

These innovations not only enhance treatment efficacy but also open new avenues for tackling complex diseases.

Harnessing an abundance of data

Unlocking insights for better healthcare

An unprecedented influx of healthcare data is being generated from previously unavailable health records, wearable devices, and genomic studies. When fully harnessed through advanced analytical tools, this data can lead to:

  • New treatments: Identifying novel drug targets and therapeutic pathways.
  • Enhanced methodologies: Improving diagnostic accuracy and personalized care plans.
  • Predictive analytics: Anticipating disease outbreaks and patient readmissions, allowing for proactive interventions.

Companies investing in big data analytics are better positioned to revolutionize healthcare delivery and outcomes.

Addressing rising healthcare costs

Efficiency through innovation

With healthcare spending accounting for 16.6% of the U.S. GDP in 2022, there’s a pressing need to reduce costs. Companies within HTEC are leading the charge by:

  • Utilizing robotics: Automating surgeries and routine tasks to improve precision and reduce labor costs.
  • Implementing process automation: Streamlining administrative and clinical processes to minimize errors and increase efficiency.
  • Leveraging data analytics: Optimizing resource allocation and identifying cost-saving opportunities.

These efforts aim to make healthcare more affordable without compromising quality.

Catering to an aging population

Meeting the needs of a demographic shift

By 2050, projections indicate that one in four people in Europe and North America will be aged 65 or older. This demographic shift will:

  • Increase demand: Higher need for diagnostics, chronic disease management, and regenerative medicine.
  • Strain resources: Necessitate more efficient healthcare delivery models.
  • Drive innovation: Encourage the development of treatments tailored to age-related conditions.

Companies focusing on age-related healthcare solutions are poised for growth as they address this expanding market.

Expanding focus beyond GLP-1 treatments

Tackling a broad spectrum of health issues

While GLP-1 receptor agonists like Novo Nordisk’s Ozempic have grabbed the spotlight with their treatment of obesity, other prevalent health issues remain:

  • Heart disease: Leading cause of death globally, requiring innovative interventions.
  • Stroke: Advances in rapid diagnosis and treatment can significantly improve outcomes.
  • Cancer: Continuous need for breakthroughs in detection and therapy.

Diversifying beyond current trends ensures a comprehensive approach to global health challenges.

The Healthcare Technology and Innovation Index – HTEC:  Strategic positioning

Capitalizing on market conditions

HTEC is uniquely positioned to benefit from favorable market trends through its focus on key innovations:

  • Robotics: Enhancing surgical success rates and increasing the number of surgeries a surgeon can perform, leading to better patient outcomes.
  • Genomics: Accelerating drug development and enabling early disease detection with technologies like liquid biopsies—a simple blood test for cancer.
  • Artificial intelligence: Revolutionizing drug discovery processes, which can lead to massive savings by increasing the success rate of treatment approvals.
  • Process automation and data analytics: Reducing costs and improving efficiency across the healthcare chain by optimizing operations.
  • Regenerative medicine: Developing methods to repair and grow organs, crucial for an aging population.

By investing in these areas, HTEC is at the forefront of addressing the industry’s most critical challenges and opportunities.

Conclusion

The healthcare sector is entering an era of transformative growth driven by technological advancements, data utilization, and the need to address rising costs and an aging population. Positive macroeconomic trends are gaining momentum, providing additional tailwinds that support the industry’s expansion. Companies within HTEC are not just adapting to these changes—they are leading them. For investors and stakeholders, HTEC represents a compelling opportunity to participate in the future of healthcare innovation and reap the benefits of an industry poised for significant expansion.

This article was originally published September 23rd, 2024 on ETF Trends. 

White-label issuer HANetf has launched the Ukraine Reconstruction UCITS ETF (UKRN), a thematic strategy designed to provide exposure to companies positioned to support the long-term rebuilding of Ukraine. The ETF tracks the VettaFi Ukraine Reconstruction Index and is listed on the London Stock Exchange, Deutsche Börse Xetra, and Borsa Italiana.

The launch underscores VettaFi’s expanding footprint in the European ETF ecosystem and its ability to develop index frameworks that support differentiated ETF exposures for global issuers.

A framework designed for Ukraine’s reconstruction

The rebuilding of Ukraine is projected to be one of the largest reconstruction efforts in Europe. The VettaFi Ukraine Reconstruction Index was developed to provide exposure to companies positioned to participate in the country’s long-term economic recovery. At launch, the index primarily includes global companies with the operational scale and technical expertise required for large-scale rebuilding and modernization projects.

Importantly, the methodology is designed to evolve alongside Ukraine’s domestic markets. The index incorporates mechanisms that allow for accelerated inclusion of Ukrainian-listed companies, enabling direct exposure to Ukrainian firms to increase over time.

Key features of the methodology include:

  • Out-of-cycle IPO inclusion for newly listed Ukrainian companies, evaluated on a monthly basis

  • Lower eligibility thresholds for Ukrainian companies

  • Explicit exclusion of companies with identified Russian operational exposure

Sector exposure is currently concentrated in industrials, with additional allocations across materials, technology, and energy.

Expanding collaboration with European issuers

The launch was marked by an event at the London Stock Exchange attended by Ukrainian and UK officials, including the Ukrainian Ambassador to the United Kingdom.

The strategy demonstrates how collaboration between index providers and ETF issuers can translate complex geopolitical and economic developments into transparent, rules-based investment frameworks. For VettaFi, the launch further reflects our growing work with global ETF issuers to design custom indices that support innovative strategies and new market opportunities.

There’s a lot we will be diving into at Exchange next week in Las Vegas. Are you building a checklist of content you want to see? Here’s what mine looks like:

  • Biggest ETF trends of the year? Check.
  • Most compelling investment opportunities across asset classes? You bet. 
  • First-hand perspectives from regulators, asset managers and advisors? Yes! 
  • The latest innovation in product design and in practice management? Of course. 

The agenda is thoughtfully packed and the expertise of the speakers and partners is unmatched. Beyond content, the overall experience promotes active engagement, mutual learning, deepening of community — and some fun, too.

There is certainly a lot going on to keep us plenty busy. Around the world, in markets, and across asset management and advisory businesses, there’s a lot of action, innovation and noise in the world of ETFs. We will parse through all of that in the course of three days.

ETF success is increasingly hard

One of the many things we’ll be exploring is the idea of success. ETF success, to be specific.

Come Sunday afternoon during the industry conclave, SS&C ALPS’ Paul Baiocchi, T. Rowe Price’s Chris Murphy, TMX VettaFi’s Sebastian Jakob (and myself) will be taking measure of what ETF success looks like in 2026.

The market now boasts more than 5,000 unique ETFs in the U.S. alone. Indeed, it’s on the verge of welcoming many more as part of an expected wave of ETF share classes being born of existing mutual funds.

As the number of ETFs grows, and competition for investor attention stiffens, we will consider why launching an ETF today is fundamentally different than it was a decade ago. Plus, we’ll look into how scale remains key, but definitely not a given.

One of the buzzwords we often hear in this market is “differentiation.” We tie success directly to being different. But what does that look like when a first-of-a-kind idea is hard to come by? If you can no longer be first to an idea, how else can you differentiate? We will explore that.

Perhaps unsurprisingly, success and scale happen in the presence of two key things: a strong value proposition — does your ETF solve an investor problem? — and a long-term commitment from the asset manager behind it. What separates ETF winners from the graveyard tickers? Awareness that the idea-to-launch phase is only the first when bringing an ETF to market. Everything after the initial bell ringing, such as marketing and distribution, is where the biggest challenge begins.

Our panel, who bring diverse expertise thanks to diverse industry paths, will look into all of this. We’ll explore what many asset managers do right, where there’s opportunity to do better, and how scale can be achieved with the right tools and right partners.

Success is harder in 2026. But market saturation and difficult-to-achieve differentiation don’t have to be a deterrent to great new ETF ideas.

On the contrary, conditions call for purposeful strategic thinking. A strong product foundation backed by solid commitment and a distribution strategy that delivers direct access to allocators can make all the difference. This is my invitation for you to come learn together with the experts what a successful go-to-market strategy looks like in 2026.

There’s still time to register! Join us on Sunday, March 15, for ETF Flight Path: Concept to Scale. Looking forward to seeing you all there.

In our latest product update, we highlight several developments across index innovation and digital platform enhancements designed to help asset managers build and grow differentiated products with actionable data.

1. GLIO index series added to our lineup

We recently expanded our real asset index capabilities through the acquisition of the Global Listed Infrastructure Organisation (GLIO) index family from FT Wilshire. These benchmarks provide exposure to global listed infrastructure and real assets—sectors often sought for diversification relative to traditional equities and fixed income.

Combined with VettaFi’s cloud-based index technology, the GLIO indices will continue to evolve as scalable, transparent benchmarks for product development.

Explore these indices further.

2. Targeted thematic growth: the software platform economy

The evolution of software—from early operating systems like MS-DOS to today’s cloud-based AI platforms—has created a new generation of companies that capture value across digital ecosystems.

This investment thesis underpins the AOT Software Platform ETF (AOTS), recently launched by our partner AOT and powered by the AOT VettaFi Software Platform Index. The strategy focuses on high-growth, profitable software platform companies with scalable business models and recurring revenue streams.

3. Capturing the stablecoin ecosystem 

As digital assets mature, stablecoins are becoming a foundational layer of the digital payments infrastructure. The VettaFi ROBO Stablecoin Ecosystem Index tracks companies across the stablecoin value chain, from issuance and custody to reserve management and payment infrastructure.

Why this matters: Stablecoin-based payments offer faster settlement, lower transaction costs, and greater transparency through on-chain verification. The stablecoin market has grown from $5 billion in 2020 to $310 billion as of the end of 2025, reflecting growing adoption across financial systems.

Read more about the case for stablecoins.

4. AI Fixed Income innovation

Artificial intelligence is driving significant investment across infrastructure and cloud computing. To provide a new way to access AI infrastructure investments, we've launched two fixed-income benchmarks focused on the debt issued by companies building the AI ecosystem:

With AI-linked bond issuance surpassing $300 billion in 2024 and total AI infrastructure investment projected to exceed $1 trillion, these indices provide credit-focused exposure to the companies financing the AI economy.

The benefit: A differentiated way to participate in AI-driven growth through income-generating assets.

5. Greater visibility into digital ad campaign performance

You can now access digital display campaign performance directly within the Investor Behavioral Intelligence (IBI) platform. The new interface provides daily visibility into campaign delivery and engagement metrics, including impressions, clicks, click-through rate (CTR), and spend. Performance data is available at both the campaign and placement level, helping teams understand campaign performance at a more granular level.

The benefit: Campaign data is available directly within the IBI platform, enabling real-time performance monitoring and faster optimization decisions without requesting reports.

6. Deeper insight into advisor engagement

The new Enhanced Audience Analytics (EAA) reports in the Investor Behavioral Intelligence (IBI) platform provide deeper visibility into the advisors engaging with your firm’s content, products, and campaigns across the VettaFi ecosystem.

The interactive reports now show how your advisor audience evolves over time and allows teams to analyze engagement by key segments such as channel, experience level, and specialization—including RIAs, CFP professionals, and high-net-worth advisors. You can also identify geographic trends, top engaged firms by AUM, and advisor audience growth across priority segments.

The benefit: By combining demographic and behavioral engagement data, firms can better measure program performance, refine targeting strategies, and prioritize outreach to the advisors most likely to convert.

To access EAA:

  1. Log in to your existing IBI account.

  2. Click the "Enhanced Audience Analytics" link in the Behavioral Analytics section of the left navigation menu.

  3. Schedule a live walkthrough of the report here. 

With greater transparency and deeper behavioral insight, teams can more effectively measure program impact, refine their marketing strategies, and focus on the advisor audiences most likely to drive growth.

VettaFi recently announced the acquisition of the Global Listed Infrastructure Organisation (GLIO) family of indices.

"This acquisition marks a significant expansion of VettaFi's index capabilities and underscores its commitment to providing institutional-grade benchmarks for the global investment community," said Brian Coco, Chief Product Officer.

The GLIO indices

The GLIO indices, which bring rigorous methodology and focus on listed infrastructure and real assets, will be rebranded. Accordingly, they will be integrated into VettaFi's existing suite as:

  • GLIO VettaFi Global Listed Infrastructure Index
  • GLIO VettaFi Global Real Assets Index

Fraser Hughes, the Founder and Chief Executive of the GLIO, noted, "Our transition to VettaFi marks a key milestone in GLIO's evolution. By combining our listed infrastructure expertise with VettaFi's global platform, technology, and distribution, we are enhancing the visibility and accessibility of GLIO indices while strengthening the foundation for innovation, broader market access, and continued growth in listed infrastructure and real assets investment."

The Global Listed Infrastructure Organisation (GLIO) is the representative body for the $3.5 trillion market capitalization listed infrastructure asset class. GLIO raises investor awareness for the asset class through research, education, events, and promotion.

As investors seek new opportunities, alternatives gain importance

"Investors continue to search for uncorrelated investment opportunities and, in many cases, alternatives to the typical universe of alternative investments," added Coco. "Listed Infrastructure and Real Assets fits squarely in these discussions and we're very pleased to be adding these benchmarks to our offerings."

With the addition of the GLIO indices, VettaFi boasts a global indexing platform spanning more than 1250 indexes with $86 billion in assets passively tracking those indexes and $80 billion in benchmarked assets. Its team of industry veterans use the latest cloud-based technology for all index research, design, calculation, dissemination and management for over 250 customers.

 

With $13.98 trillion in assets, the global ETF market continues to thrive. Europe has seen over 40% growth throughout 2025. The potential for ETF opportunities is enormous, given that Europe has a population that exceeds the U.S. and shares similarities in terms of wealth demographics.

On February 11, 2026, HANetf hosted a webinar discussing how to enter the European UCITS ETF market. The panel included London Stock Exchange’s Alex Watkins, Susquehanna’s Sam West, A&L Goodbody LLP’s Stephen Carson, US Bank’s Tony O’Brien, VettaFi Head of Business Development in EMEA & Asia, Axel Belorde, and HANetf’s Jason Griffin.

Europe represents an enormous array of opportunities for ETF issuers, but there are a host of considerations asset managers need to make when entering the European UCITS ETF market.

The challenges of launching an ETF in Europe

Launching an ETF is complicated anywhere, but European ETFs come with their own distinct challenges. These include:

  • Market fragmentation. Trading in Europe occurs across multiple exchanges, which creates liquidity challenges.
  • Difficulty connecting to authorized participants. The infrastructure needed for creation and redemption can be challenging in Europe, and establishing relationships with authorized participants isn’t always straightforward.
  • Platform limitations. Many investment platforms in Europe were not built with ETFs in mind, which leads to a lack of native “out of the box” support for ETFs. This can lead to bespoke, costly solutions.
  • Regulatory complexity. In the U.S. or Canada, the ETF market is unified and the regulations are clear and uniform. In Europe, there are a diverse set of regulations spanning multiple countries. Cross-border distribution is more challenging as a result.
  • Barrier to entry. Aside from additional costs, it is also challenging to set up and launch an ETF in Europe. The market is dominated by the largest players, creating awareness challenges for smaller ETFs looking to establish a foothold.

UCITS eligible ETFs

The European Union’s “Undertaking for Collective Investment in Transferable Securities” directive means that ETFs seeking to be tradable to retail investors in the European Union must adhere to certain guidelines. These include sticking to a diversification standard of not holding more than 10% of the net asset value of the product in a single holding. There are additional regulatory and liquidity requirements. Though it is possible for some European retail investors to access non-UCITS eligible ETFs, it is not straightforward or simple.

UCITS ETFs follow strict diversification and safety standards. As a result, they can be established in one region and then be sold freely across other European Union markets. “It is permitted for sale to retail investors,” Carson said. “It does come with it a range of risk management, diversification requirements, etc. But there is still quite a bit of product development flexibility within that framework.”

Indexing in the European market

Data is important throughout the process of establishing an ETF. Whether it’s the data used to create a starting universe or build the index or the data around investors and buyers, it plays a critical role to the success or failure of an ETF.

Speaking to some of the big differences between Europe and the U.S., Belorde shared, “Europe, unlike the U.S., is a multilingual market.” Though there is some universality around the Irish UCITS regime, Belorde noted that, compared to the U.S., “there are very different buyer personas, cultural aspects, that you can’t find in a deep and large market like in the U.S.”

First to market

For asset managers, speed to market is the primary differentiator, especially in thematic investing. As Belorde noted, launching even slightly behind a competitor can create a valuation gap of 'hundreds of millions.'

Belorde explained that owning media properties like ETF Trends and ETF Stream allows VettaFi access to what investors are researching and looking for in their investments.“There’s a lot more flexibility around behavioral analytics in the U.S. in terms of regulatory framework compared to using that data in Europe,” Belorde noted. 

These insights and best practices can be leveraged. Though European investors have distinct behavioral personas, the investing population as a whole shares patterns and tendencies with U.S. investors. They are faster to warm to some investment trends and slower to embrace others, but in aggregate they ultimately make similar decisions. Belorde offered that European investors have been quicker to embrace automation and AI than U.S. investors were, with European defence investing driving a lot of that behavioral push. The myth is that ideas migrate from the U.S. to Europe. According to Belorde, the reality is that Europe and the U.S. pass that baton back and forth, trading ideas and innovations.

With increased regulatory complexity in the EU, the issuers who can quickly spot a market need and then efficiently get a product to market have an edge. That makes it important for asset managers to work with an index partner who has access to lots of data and can rapidly backtest, iterate, and stand up a product. Belorde continued, “having the right data, the right partner on the end to end operations is extremely important. The legal framework, the authorization, the listings, the trading but also the distribution and marketing that makes a whole package.”

Building and launching products for the European market

The current ETF market in Europe is hot, and there are certain kinds of products in particular that are drawing investor attention. According to the HANetf webinar, active strategies are starting to draw the same kind of attention in Europe that they are in the U.S., but there is also a rising interest in thematic ETFs. Referring to HANetf’s the Future of Defence UCITS ETF which is staked to VettaFi’s EQM Future of Defence Index, West noted, “In terms of demand for those, we’ve definitely seen an uptick. There were a couple of really well-timed launches last year in European defense. We’re really starting to see flows into thematic products picking up in the last 12 months.”

Belorde shared that though some ETFs come in with seed money that helps get them started, that’s not the case a majority of the time. “They need large ETFs to allocate large tickets because they've got all the concentration limits, right? So you need to think about very smartly coordinating between your sales force and your marketing [budget].” Issuers coming in with a fresh product with limited to no seed money must take advantage of their launch window to draw the attention of individual investors. That allows them to grow the ETF so larger buyers can jump in. Belorde emphasized the critical importance of working with a company that has expertise across operations, marketing, and distribution. “Reaching out at the right time to the right audience is absolutely key.”

Bottom line

The European ETF market is challenging to enter, but a UCITS ETF can be a boon for asset managers. The regulatory challenges and fragmented nature of the EU does create obstacles. However, it also means the market is ripe for innovative ETFs that can fill in gaps for investors. It is important to find an end-to-end strategic partner who can help stand up a product quickly and efficiently.

Investment management requires data-driven decision-making on multiple fronts. 

Teams within asset management firms can gain a competitive edge if they leverage behavioral analytics for data-driven product and distribution decisions. You can use behavioral analytics to enhance and optimize investment strategies, building products that investors want.

How behavioral analytics supports data-driven asset management

In asset management, behavioral analytics refers to collecting and analyzing data about investor actions, trading patterns, and responses to market events. These insights help identify patterns, anticipate future investor actions, and deepen understanding of how investors engage with products. Armed with this intelligence, asset managers can refine positioning, tailor communications, and even adapt investment strategies to better align with investor behavior.

By taking a data-driven approach, distribution and product teams can move beyond intuition-based decisions to evidence-based strategies that deliver more consistent results. This leads to a clearer understanding of what drives investment decisions, and how those behaviors can influence flows, product adoption, and market volatility.

You might like: How asset managers are using analytics to distribute ETFs and connect with advisors

Behavioral patterns affecting financial markets

While investors strive to make rational, informed decisions, decades of market data show that behavioral patterns consistently influence how investors respond to risk, volatility, and opportunity.

Recognizing these patterns can help asset management teams build predictive models.

Herd behavior

Investors are sometimes influenced by a fear of missing out on an investment opportunity that other investors will capitalize upon. Here’s how that typically unfolds:

  • A security appears undervalued, and early investors start buying.
  • As more investors pile in, the price rises, climbing well beyond fair value.
  • Late investors still jump on the bandwagon, buying at inflated prices. 

Market trends can be compelling, but their relevance ultimately depends on how well they align with an investor’s overall strategy.

For example, disruptive, high-risk tech is getting major media attention. This might make sense for a younger investor who’s trying to build their portfolio. But a retiree mainly focused on fixed income, could stand to lose a lot, yet still wants to invest because “everyone’s talking about it.”

Similarly, real-time data from social media can spark herd behavior. If a security or asset is getting a lot of attention, some investors might find themselves drawn toward it, regardless of where it fits within their portfolio.

Loss aversion

Loss aversion is a common cognitive bias where people feel the pain of losses more intensely than the pleasure of equivalent gains. This causes investors to make irrational decisions to avoid the feeling of loss, even when holding on leads to greater losses.

It typically occurs when an asset drops in value but the investor refuses to sell, hoping for a rebound that may never come. The NFT market collapse is an example:

  • NFTs captured widespread investor interest in 2021-2022.
  • When values began to decline, many investors held onto their NFTs instead of selling them for a small loss.
  • As the market cratered, those small losses accumulated into substantial ones.
  • Investors who might have lost only 20% by selling early ended up losing 80-90% or more because they were holding.

So, how does this happen?

Loss aversion hampers decision-making. Most investors don’t consider a loss to be “real” until they sell. This causes them to hold losing positions for longer than logic would dictate.

Investor biases

There are many types of biases that can lead investors to make poor decisions:

  • Overconfidence bias causes investors to make frequent trades, believing they can outperform benchmarks due to their special insight and investment ability.
  • Status quo bias leads them to take fewer risks. In this situation, investors could benefit from changing up their strategy to adjust to new circumstances, but often choose to stick with what they have.
  • Recency bias convinces investors to place more weight on recent events rather than long-term market trends.
  • Confirmation bias encourages investors to only invest in the securities they already think are the best, losing out on new opportunities.

Understanding the psychological mechanics of the investor lifecycle allows for the construction of more resilient strategies. As an asset manager, you can institutionalize objectivity through several practices:

  • Quantitative post-mortems: Audit historical decision data to identify systematic patterns and refine your strategic edge.
  • Systemic friction: Implement mandated observation windows to ensure every trade aligns with long-term investment policy statements (IPS).
  • Algorithmic integration: Leverage advanced platforms to standardize execution and maintain technical consistency across volatile market cycles.

Modern analytical tools allow asset managers to identify patterns in real time, measure their impact, and respond by adjusting their investment approaches. 

Data-driven tools for better investment strategies

Behavioral analytics can improve product performance and marketing efforts alike by revealing investor actions.

Access data and insights with a good partner

Asset management teams can greatly benefit from using advanced technologies that analyze investor behavioral patterns. Access to third-party data can help fill out the behavioral picture of a given investor or advisor, allowing distribution teams to shorten sales cycles and operate more efficiently.

Partners like VettaFi have a wealth of data stored. In the case of VettaFi, our data warehouse holds more than a decade’s worth of information from our online ecosystem of financial advisors, institutional investors, and individual investors. This data can be used to:

  • Source investors
  • Find quality leads
  • Shorten sales cycles
  • Increase engagement
  • Improve client experience
  • Enhance marketing efforts

Artificial intelligence and machine learning

Insights from AI-powered tools are increasingly necessary for asset managers. Predictive models powered by AI use natural language processing to understand and gauge things like future price movement, looking at where, when, and how investors will want to invest. 

Asset managers can use machine learning to build detailed profiles of investor preferences, giving them a clearer picture of an investor’s preferences and automatically adjusting portfolio recommendations in response.

CRMs and client analytics software

Asset management firms need to have a robust CRM system that can collect and analyze metrics and execute advanced analytics regarding clients and prospects. Understanding what your audience is researching, and trying to problem solve, can help in several ways.

Having a partner with robust data fluency and collection capabilities offers several benefits, including: 

  • Workflows automation
  • Segment contacts
  • Engagement tracking
  • Improved operational efficiency
  • Streamlined business operations

Audit your current CRM capabilities against these criteria. If you’re missing two or more of these functions, it’s time to either upgrade your system or find a partner who can fill in the gaps.

Building a data-driven process in 5 steps

Unlocking access to behavioral insights can help teams deploy powerful processes that work to solve client problems. Use this five-step framework to build a data-informed approach at your asset management firm.

#1: Define your strategy, goals, and scope

Look for specific, measurable goals to become the foundation of your data strategy, such as improving client retention by 15% or increasing AUM for existing clients. Document which investment segments you want to focus on first to avoid trying to do it all at once. 

#2: Decide which data sources you want to use

Review internal data (CRM records, transaction history, client communications) and external data (third-party behavioral data, market sentiment analysis). Don’t overlook siloed, unstructured data like social media interactions or advisor messages.

Next, prioritize the data sources that align with your goals. Establish clear data governance practices to ensure data quality and compliance as you integrate multiple sources. Also, ensure your data architecture can support the integration of those multiple sources without creating bottlenecks or compatibility issues.

#3: Use advanced analytics tools to identify patterns, analyze data sets, and create behavioral profiles

The data transformation process – converting raw data into insights you can actually use to improve business outcomes – is where most firms struggle. If you have an internal data or business intelligence team, bring them your goal, use case, and example data sources. By providing the context and end goal, these teams can help you build out your reporting model. 

If your firm lacks internal resources, start by pulling together similar data-sets or information that sits within the same system. Build out a report that best stitches the data together. Even if the information is not perfect, this can be used for directional insights.

As you analyze the reports, spot correlations between specific actions. Look for patterns in how investors consume content, their communication preferences, and timing of engagement.

Finally, use these patterns to create behavioral profiles that segment your audience into meaningful groups:

  • Investment focus (ESG, growth, outcome)
  • Preferred content format (video, written, data)
  • Engagement timing
  • Decision-making speed

These profiles allow you to personalize your outreach and better connect with each segment.

#4: Establish a process and create a roadmap

Create a plan for how you’ll use behavioral insights in your daily operations. For example:

  • Insights about risk tolerance can inform how you construct portfolios.
  • Content engagement data can inform how you communicate with clients.
  • Trending topics data can guide how you manage your marketing campaigns.

Set quarterly goals to track your progress over time.

#5: Monitor and refine over time

Review your KPIs monthly and run a thorough assessment every quarter. Be prepared to make changes based on what the data reveals. 

Use data to your advantage

Behavioral analytics drives business value creation across the board. It can be used to support both distribution efforts and product development.

In addition to understanding the challenges investors face, asset managers must also look at how investors seek solutions and tackle product due diligence.

Partners like VettaFi can help issuers by developing indexes that meet investor needs and support distribution efforts.

Thematic ETFs have maintained their impressive momentum in early 2026, building on a resurgent 2025. After gathering $23 billion last year, the category added another $4 billion in January alone. However, as the market landscape shifts, the inherent challenges of thematic investing—such as timing individual trends and managing overlapping exposures—remain a hurdle for many. The VettaFi Thematic Rotation Index offers a disciplined solution, utilizing quality and momentum scores to navigate these rotations systematically.

A multi-sector approach to global megatrends

VettaFi’s approach extends far beyond the typical technology-heavy thematic lens. While it powers tech-focused funds like the Amplify Video Game Leaders ETF (GAMR) and the ROBO Global Artificial Intelligence ETF (THNQ), the index family also captures critical trends in energy, financials, materials, and healthcare.

The thematic rotation index is rebalanced quarterly. It applies an equal-weighting strategy to selected themes and capping individual company exposures at 8%. This structure is designed to mitigate the concentration risk that often plagues thematic portfolios, while also reducing the tax burden associated with manual trading.

Inside the rebalance: Identifying leaders and laggards

The late December rebalance highlighted seven sub-themes that currently dominate the index based on VettaFi’s factor analysis:

While these sectors thrived, previously hot themes like Cloud Computing and Travel & Leisure saw their momentum fade. As of January 31, 2026, the largest constituents reflected this diverse mix, including American Express (4.7%), Cameco (3.6%), Charles Schwab (3.4%), and Eli Lilly (1.9%).

Lowering benchmark overlap for better alpha

One of the most compelling aspects of the rotation index is its ability to complement core holdings. While it includes household names like Microsoft and NVIDIA, it also provides exposure to lesser-known  innovators like D-Wave Quantum and Rigetti Computing. This results in a relatively low overlap with major benchmarks—just 21% with the S&P 500 and 23% with the Nasdaq 100. A total of 185 companies were part of the VettaFi index with a median market capitalization of $18 billion. 

This tactical breadth paid off in the 12 months ending January 2026. The VettaFi index delivered a 24% return, outpacing the Nasdaq 100 (20%), the S&P 500 (16%), and the iShares US Thematic Rotation Active ETF (THRO) (13%). While the United States remains the primary geographic weight at 60%, the index’s global reach—spanning Australia, Canada, China, Denmark, and Japan—provides the cross-border diversification necessary for today’s market environment.

VettaFi LLC (“VettaFi”) is the index provider for GAMR and THNQ, for which it receives an index licensing fee. However, GAMR and THNQ are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GAMR and THNQ.

This article was originally published February 18th, 2026 on ETF Trends.

ETF trading volume exceeded $1.4 trillion in 2025, with market makers handling more than 99% of secondary market transactions. Yet many asset managers don’t fully understand how ETF market making works, or how to use it for better liquidity and pricing.

This guide explains the mechanics of ETF market making, from compensation models and stress scenarios to evaluation criteria and performance KPIs, giving asset managers the knowledge they need to build stronger market maker partnerships.

What is ETF market making?

ETF market making is the practice of providing liquidity in the secondary market to support accurate, daily trades between brokers and individual ETF investors. 

Market makers, sometimes called broker-dealers, are a critical part of the secondary market. Their ability to provide continuous trading boosts liquidity and helps asset managers determine pricing.

Core functions of market makers

Where authorized participants create and redeem shares on the primary market, it is market makers who match buyers and sellers on the secondary market. 

Their core functions include:

  • They provide bids and asks (two-sided quotes) to other market participants to keep the value of the ETF in line with Net Asset Value (NAV) on an intraday basis during the trading day.
  • Market makers buy and sell ETF shares, ensuring that there is an inventory of shares to allow for easy transactions between buyers and sellers.
  • They facilitate price discovery by continuously updating quotes based on real-time market conditions.
  • They assume inventory risk to ensure continuous liquidity throughout trading hours.

Understanding these functions helps asset managers evaluate whether market makers are fulfilling their fundamental obligations. It also helps them identify any service gaps that might require additional market maker partnerships.

Types of market makers

There are several different kinds of market makers, and asset managers need to understand the distinction between them, as they offer varying levels of commitment, performance standards, and support. Support is particularly critical during periods of market stress.

The basic types of market makers include:

  • Designated Market Makers (DMMs): A relatively new kind of market maker. Previously called “specialists,” DMMs were introduced by the New York Stock Exchange in 2008 to increase competitiveness and market quality. The creation of this role happened in tandem with the growing dominance of electronic trading. They are market makers who have been selected by an exchange, such as NYSE, to enhance and maintain a set list of securities.
  • Lead Market Makers (LMMs): These market makers have an elevated status that comes with greater responsibilities. Like all market makers, they help optimize liquidity and make price discovery more transparent. They have a mandate to demonstrably enhance market quality in the form of tighter markets.
  • Supplemental Liquidity Makers (SLPs): Market participants that create high volume on exchanges with the goal of keeping markets liquid. Exchanges will offer them rebates and incentives for providing enhanced liquidity. SLPs date back to the early stages of the Great Recession.
  • Standard Market Makers: These are regular market makers with no special designations.

When building your market maker roster, consider including a mix of these types to balance commitment levels, with at least one LMM or DMM to ensure enhanced support during periods of market volatility.

You might like: A closer look at authorized participants in the ETF ecosystem

How market makers support ETF liquidity and pricing efficiency

Market makers support ETF liquidity through three major mechanisms: liquidity provision, price discovery, and maintaining pricing efficiency during stress.

Liquidity provision

  1. As liquidity providers, market makers provide constant bid-ask quotes with narrowing bid-ask spreads to encourage trading, resulting in higher liquidity and lower transaction costs for individual investors.
  2. Market makers assume the risk of holding ETF shares to facilitate easy trades. 
  3. During periods of volatile market conditions, market makers maintain quote obligations, with regulatory exceptions for extreme events such as circuit breakers or market halts.

Asset managers should monitor bid-ask spreads and quote consistency to track whether their market makers are adequately fulfilling these responsibilities.

Price discovery and pricing efficiency

To keep ETF share prices efficient and accurate, market makers balance supply and demand. They are consistently quoting up-to-date bid-ask spreads. Additionally, market makers ensure that market prices stay in line with NAV and act to prevent large deviations in price.

Providing accurate pricing and liquidity in the secondary market works hand-in-hand with price discovery. This ensures real-time valuation of intrinsic fair value throughout the trading day.

Compensation models

Understanding how market makers function economically is essential for asset managers. Truly knowing their economic landscape can help asset managers negotiate better relationships and understand how a market maker will operate when markets are stressed. It is critical to understand the structuring agreements that benefit all parties involved.

Here’s how market makers earn compensation:

  • Bid-ask spread: The primary profit for market makers comes from buying at bid and selling at ask.
  • Exchange rebates: Given their importance, market makers receive payments from exchanges for the service of providing liquidity and assuming risk.
  • Payment for order flow: Sometimes, market makers will receive compensation from brokers routing orders to them.
  • Market share incentives: Some exchanges have programs that reward high-volume market makers, creating additional incentives.

Knowing these revenue streams allows asset managers to structure agreements that bring ETF performance goals into alignment with market maker incentives, allowing both parties to benefit.

Market stress scenarios and limitations

Despite these revenue opportunities, market makers often face challenges during periods of market stress, which can impact their ability to provide consistent quotes and tight spreads.

Examples of scenarios that can strain market maker operations include:

  • Flash crash events: Extreme volatility can trigger risk management protocols that cause market makers to step back from their quote obligations temporarily, widening spreads dramatically until market conditions stabilize.
  • Circuit breaker periods: When exchanges halt trading, market makers cannot maintain continuous quotes, creating gaps in liquidity that can affect price discovery when trading resumes.
  • Illiquid underlying securities: Market makers widen spreads significantly when the ETF’s underlying assets become difficult to hedge, particularly in emerging markets, international, fixed income, commodity, or derivative-based ETFs where the underlying markets may be closed or experiencing their own liquidity constraints.
  • Capital constraints: Regulatory capital requirements can limit how much inventory market makers can hold, especially during volatile periods when risk-weighted assets spike, potentially reducing their ability to provide depth at quoted prices.

Partnering with an index provider like VettaFi can help mitigate these challenges. VettaFi’s expertise in market structure ensures that ETFs are designed with features that make it easier for market makers to provide consistent liquidity even during stressed market conditions.

How market makers facilitate ETF trading activity

Liquidity is essential to the success of any product. Strong liquidity and accurate pricing encourages investors to invest. Market makers have incentive to trade when the ETF price doesn’t align with the price of the underlying assets.

Enabling continuous trading

Market makers facilitate daily ETF trades in critical ways:

  • Constantly posting bid-ask prices: Market makers continuously update and display two-sided quotes throughout the trading day, providing real-time price signals to the market. This constant presence increases pricing efficiency and encourages trading activity by giving investors confidence they can execute at transparent, competitive prices.
  • Making sure investors can always trade throughout their trading day: Market makers maintain active quotes during all market hours, preventing liquidity gaps that could frustrate investors or force them to wait for execution. Consistent availability is particularly important for asset managers marketing their ETFs as liquid investment vehicles.
  • Holding their own ETF inventory to fulfill trades: Market makers hold their own inventory of ETF shares, allowing them to immediately buy from sellers or sell to buyers without delay. This inventory commitment means they're taking on market risk, which is why their compensation models include mechanisms to offset this exposure.
  • Handling different order types: Market makers process various order types including market orders, limit orders, and stop orders, giving investors flexibility in how they execute trades. This capability allows both retail and institutional investors to implement diverse trading strategies suited to their specific needs.
  • Promoting pre-market and after-hours trading: Where applicable, market makers extend their quoting activity beyond standard exchange hours, enabling investors to react to news and events that occur outside regular trading sessions. This is particularly beneficial for ETFs tracking international markets or responding to after-hours developments.
  • Facilitating block trades for institutional investors: Market makers work directly with institutional investors to execute large orders that might otherwise move the market if traded on the open exchange. By negotiating block trades privately, market makers help institutions minimize price slippage and execution costs.

When your market maker delivers on all these fronts, it helps you create a trading experience that attracts and retains both retail and institutional investors for stronger asset growth.

Impacting different investor types

Market makers matter to all investor types:

  • Retail investors benefit from tight spreads and immediate execution on smaller orders. These advantages let retail investors operate strategically in the market.
  • Institutional investors require deeper liquidity for larger block trades. Market makers often work closely with institutions to minimize market impact and ensure a smooth trading experience with minimal volatility and stress.

Asset managers should care about this because these dynamics help you communicate your ETF’s tradability advantages over mutual funds to different investor segments. You can tailor your market accordingly, ensuring that both retail and institutional investors have access to your products and a smooth trading process.

Related: ETF vs mutual fund: 9 strategic considerations for asset managers

The market maker and authorized participant relationship

Market makers and authorized participants serve distinct but complementary roles in the ETF ecosystem. While some firms operate as both, it’s important to understand how they function separately.

  • Market makers provide liquidity in the secondary market, but rely on authorized participants to handle the creation and redemption processes for ETF shares in the primary market.
  • Both market makers and authorized participants are essential in supporting liquidity and pricing.
  • When there are price differences between the ETF cost and value of its underlying securities, market makers can rely on authorized participants to create or redeem ETF shares.

Both take advantage of arbitrage opportunities

Market makers and authorized participants both leverage pricing discrepancies to keep ETF prices aligned with NAV:

  • When an ETF is at a premium, market makers rely on authorized participants to create new shares. New shares increase the supply on the open market and push the price down toward NAV.
  • When an ETF is at a discount, market makers buy shares on the market, which decreases supply and pushes up the market price toward NAV.

Together, these arbitrage mechanisms help to maintain efficient markets and protect investors from overpaying or underselling their ETF positions.

When firms play both roles

When a single firm operates as both market maker and authorized participant, certain dynamics emerge:

  • Integrated operations: Firms acting in both roles can coordinate more efficiently.
  • Potential conflicts: Potential conflicts are reduced when asset managers understand how to manage these relationships.
  • Regulatory oversight: The SEC monitors for conflicts between market makers and authorized participant activities.
  • Communication protocols: Firms operating in dual roles typically establish clear procedures for managing potential conflicts and coordinating between functions.

Asset managers should proactively ask dual-role firms about their conflict management procedures and request regular reporting on how they’re maintaining appropriate separation between functions.

What to consider when working with market makers

Asset managers should always examine these key criteria when choosing market makers for their ETFs:

  • Track record with similar ETFs: Request performance data from comparable products.
  • Technology capabilities: Assess the market maker’s algorithmic trading systems and technological infrastructure.
  • Financial stability: Review balance sheet strength and regulatory capital.
  • Geographic reach: Ensure the market maker has the ability to cover across relevant trading venues and time zones.
  • Commitment level: Distinguish between LMM commitments and more standard market maker participation.
  • Underlying asset expertise: It is one thing to have a track record with a similar ETF, but it is particularly important for a market maker to understand the underlying asset classes. This is especially true in the case of international, fixed income, or commodity ETFs.
  • Market share and reputation: Consider how a market maker stands among their peers.

Use these criteria to evaluate potential market maker partnerships, weighing each factor based on your ETF’s specific needs and investor base.

Market maker agreements

Asset managers working with market makers should negotiate the following agreement terms:

  • Performance commitments: Spread targets, minimum quote sizes, uptime percentages.
  • Incentive structures: Payment terms, performance bonuses, exchange rebate sharing.
  • Termination clauses: Notice periods, performance-based termination rights.
  • Confidentiality provisions: Protection of portfolio composition and trading strategies.
  • Reporting requirements: Frequency and format of performance reports.
  • Technology and data access: What information market makers need and how it is shared. It is worth noting the LMM agreements typically include enhanced commitments in exchange for preferential treatment or compensation.

Review these agreement terms every year. Be prepared to renegotiate if market conditions change or if your ETF’s trading profile significantly evolves.

Regulatory considerations

There are a host of regulatory considerations to keep in mind regarding market makers. 

SEC Regulation NMS includes best execution requirements.  FINRA and exchange-specific rules also impact market makers. There are also exchange-specific rules that could impact market makers. The NYSE, Nasdaq, and CBOE operate in a distinct fashion and could have different requirements for market makers to fulfil.

Market manipulation concerns are still real. Wash trading, layering, spoofing, and prohibitions are all worth keeping an eye on. Market makers also have disclosure obligations, such as Form N-1A and prospectus requirements around liquidity.

Finally, asset manager responsibilities include overseeing market maker compliance, maintaining documentation, and reporting material issues to board and regulators.

Check out: The asset manager’s guide to SEC rule 6c-11 compliance

Tracking performance

Asset managers should establish regular monitoring protocols to evaluate market maker performance and identify potential issues before they impact investor experience. Tracking these key performance indicators provides objective data for relationship management and helps justify decisions to add, remove, or adjust market maker partnerships.

Essential metrics to monitor include:

  • Average bid-ask spreads: Compare your ETF's spreads to peer products with similar strategies and track trends over time. Consistently wider spreads than competitors may indicate underperformance or inadequate market maker support.
  • Quote uptime percentage: Monitor how frequently market makers maintain active quotes during market hours, targeting 95%+ uptime. Frequent quote withdrawals can signal operational issues or inadequate commitment.
  • Market share of volume: Identify which market makers are most active in your ETF to understand where liquidity actually comes from versus contractual commitments. Declining share from a lead market maker warrants investigation.
  • Execution quality metrics: Review price improvement statistics and effective spreads to assess whether investors are receiving better execution than posted quotes, indicating healthy competition among market makers.
  • Response time to inquiries: Measure how quickly market makers respond to questions about unusual trading activity, spread widening, or operational issues. Slow response times often precede larger problems.
  • Premium/discount patterns: Track how closely your ETF trades to its NAV throughout the day. Persistent premiums or discounts indicate market makers aren't effectively arbitraging price discrepancies, which is a core function they should perform consistently.

Make sure you have a quarterly review process to assess these key performance indicators (KPIs). If you have an underperforming market maker, schedule a meeting with them to address the issue before it escalates.

Warning signs of market maker issues

Not every market maker partnership will be the right fit. Here are some red flags to keep an eye out for:

  • Widening spreads: There are times when spreads widen of their own accord, but keep an eye out if your product is diverging from peer ETFs.
  • Inconsistent quoting: Gaps in bid-ask can indicate an issue.
  • Decline in market share: If a market maker is handling a decreasing percentage of overall volume, that warrants close monitoring or investigation.
  • Operation errors: Settlement failures and pricing mistakes should be minimal.
  • Reduced responsiveness: Slow or inadequate communication could be a sign of problems.
  • Financial instability: Regulatory actions and credit downgrades are red flags.
  • Persistent premiums and discounts: Failure to maintain NAV alignment is a failure of the basic job of being a market maker.

If you observe several warning signs at once, contact the market maker immediately and start looking at backup options to protect your ETF’s liquidity profile.

ETF market making FAQs

What’s the difference between a lead market maker and a regular market maker?

A lead market maker (LMM) has enhanced obligations and privileges on an exchange, including tighter quoting requirements and more presence in the market. Regular or “standard” market makers provide liquidity but without the heightened commitments. LMMs often receive benefits like lower fees or rebates in exchange for their elevated role.

How many market makers should an ETF have?

An ETF needs at least one market maker to operate, but most have three to four market makers. Large ETFs often have 10 or more competing to provide liquidity, usually resulting in tighter spreads or better pricing.

Do market makers charge fees to ETF issuers?

No, market makers typically do not charge fees to ETF issuers. They earn revenue through bid-ask spreads and may receive rebates or reduced transaction fees from exchanges for providing liquidity to the ETF.

What’s a good bid-ask spread for an ETF?

Tighter spreads are generally better, but a good big-ask spread tends to vary by asset class and product type. Ideally, the spread to aim for is the tightest spread possible in the current market environment for the particular security.

Can an ETF function without market makers?

No, ETFs cannot function effectively without market makers. Market markers are essential for providing continuous liquidity, facilitating the creation and redemption process, and ensuring investors can buy and sell shares throughout the trading day at fair prices.

How do I know if my ETF has good market maker support?

Good market maker support is indicated by consistently tight bid-ask spreads (close to the asset class average), high trading volume, minimal price deviation from net asset value (NAV), and stable liquidity even when the market is volatile.

Optimizing your ETF market making strategy

Market makers are essential partners in ETF success, providing the liquidity and pricing efficiency that attracts investor capital. By understanding market makers’ compensation models, stress limitations, performance metrics, and other operational functions, asset managers can build stronger partnerships and negotiate better agreements to ensure their ETFs deliver consistent tradability.

Whether you’re launching a new ETF or optimizing an existing one, strategic market maker relationships supported by thoughtful index design can make the difference between a product that merely functions and one that thrives.

Historically, index providers have acted less like a partner and more like a vendor: they license benchmarks, calculate returns, publish methodologies, and execute rebalances. But as competition intensifies, these basic services are no longer enough. 

High-performing index providers actively contribute to a product’s success. They collaborate on digital marketing, support distribution, offer rapid backtesting, and offer proprietary data and analytics.

Today there are more than 4,000 exchange-traded funds (ETFs) in the U.S. competing for assets, and 81% fail to reach $1 billion in AUM. That means asset managers need every advantage available - which is why finding the right index partner will make the difference in whether your product struggles or finds success.

Old vs. new partnership models

Traditional index licensing was a straightforward, set-it-and-forget-it vendor relationship. Asset managers would license a benchmark and the provider would handle methodology maintenance and occasional rebalancing. 

Some providers offered backtesting support during product development, but the ongoing relationship was mostly passive. Once an ETF launched, the provider’s role became administrative: execute the rebalance, publish the constituent list, and invoice the licensing fee. 

Strategic index partnerships are different. Not only do they provide faster backtesting, but they also keep working to support a product’s success. This means offering an expanded suite of services that address the actual challenges asset managers face when launching and scaling an ETF.

Strategic services include:

  • White label and customized index capabilities: Building a unique, customized index from scratch is an expensive, complex undertaking, especially for smaller firms. White label solutions make it easier for asset managers to quickly and cost-effectively bring differentiated products to market.
  • Improved access to data: First-party data alone is rarely enough to achieve robust product development. Access to second-party or third-party datasets helps asset managers to build better products and connect them more effectively to investors who want specific solutions. 
  • Insight into industry innovations: The financial services ecosystem spans multiple sectors and geographies. Strong index partners bring insights and innovations from across the industry that can help asset managers further distinguish their products.
  • Insight into regulatory changes: Staying ahead of regulatory changes (and understanding their implications) is a competitive advantage. Index partners with regulatory expertise provide an extra layer of oversight, which is incredibly valuable for asset managers looking to break into new regions or product categories.
  • Thought leadership and educational content: Index construction and methodology can be technically complex. Partners who produce clear thought leadership help demystify these concepts for advisors and investors, making products easier to understand and adopt.
  • Coordinated advisor engagement: Index providers with established advisor networks or proprietary audience data can help match products to advisors with the right solutions, preventing wasted effort on unqualified leads.
  • Depth of coverage across asset classes: Asset managers building diverse product lineups need partners with expertise across fixed income, international equities, alternatives, and emerging asset classes. Broad coverage ensures consistent methodology and support across product suites.

These services come with cost and implementation considerations. Not every asset manager needs every service, and there are legitimate scenarios where traditional licensing is still the most appropriate model – especially for straightforward, commoditized index strategies.

The trick is understanding which services are best for your particular product strategy and growth goals, then choosing partners accordingly.

Specialized services offered by top index providers 

Launching an ETF is a challenge, but scaling it to sustainable AUM levels is even more demanding. Top index providers differentiate themselves by providing specialized services that actively support asset managers throughout the ETF lifecycle.

Here’s a closer look at how these specialized services advance asset managers’ goals.

Rapid backtesting capabilities

Product development requires extensive testing to validate investment hypotheses before committing regulatory and marketing resources to a launch. Backtesting reveals how a proposed strategy would have performed across different market cycles, providing critical insights into risk characteristics, return profiles, and behavior during stress periods.

While backtesting is fundamentally a mathematical exercise, the process can be frustratingly slow with traditional providers. Delays of days or weeks between backtest results extend product development timelines and limit the number of iterations teams can explore.

Responsive index partners dramatically accelerate this process. While the turnaround on backtests varies based on their complexity, VettaFi has a state of the art, cloud-based backtest engine, Index Factory, that can iterate results very quickly and easily integrate third party data sources to help accelerate speed to market. This enables rapid prototyping, allowing asset managers to test several different versions of a strategy to identify what works, adjust what doesn’t, and iterate quickly.

Faster iteration means better products. Development teams can explore more potential solutions, pressure-test edge cases, and refine methodologies before launch. That increases the probability the final product will appeal strongly to advisors and investors alike.

Proprietary data and analytics

Historical data quality and breadth fundamentally determine what products can be built and how effectively they can be tested. Asset managers limited to standard market data may find themselves unable to fully realize unique investment theses or adequately backtest strategies involving less liquid asset classes.

Access to proprietary datasets opens new product possibilities. Specialized data covering fixed income, international markets, alternatives, or thematic segments allows asset managers to build and validate differentiated strategies that would be impossible with generic data sources alone.

VettaFi’s data capabilities significantly expanded with the acquisition of indices from Credit Suisse. As Chief Product Officer Brian Coco explained:

“These indices are widely recognized for their quality and utility, and we are excited to now offer them under the VettaFi brand. Coupled with our new, intuitive index builder workbench, we are empowering asset managers and financial professionals with unparalleled control and flexibility in their product strategies.”

The platform provides access to 25+ years of historical data across equity and fixed income asset classes including specialty data sets in areas such as MLPs, Closed End Funds (CEFs), BDCs, REITS and ADRs.

Beyond index data, VettaFi’s Investor Behavioral Intelligence Platform provides more than 10 years of advisor engagement data, which helps asset managers pinpoint the best products and strategies for their target audience.

Distribution support

Even exceptional products struggle to gather assets if advisors and investors don’t know they exist. The challenge is particularly acute for new ETFs from smaller or emerging asset managers who lack established brand recognition and distribution relationships.

Building advisor awareness traditionally requires significant time and capital investment, such as conference attendance, wholesaler teams, direct outreach campaigns, and paid advertising. For new products, this marketing spend comes at a time when revenue is lowest, adding another challenge to the financial equation.

Index providers with established financial advisor networks and content platforms can provide immediate access to qualified audiences. VettaFi’s portfolio of ETF-focused publications - including ETF Trends, ETFdb, ETF Stream, and Advisor Perspectives - attracts more than 1 million unique visitors a month and has cultivated a community of 68,000+ social media subscribers. More than 100,000 financial advisors register for VettaFi webinars annually.

These platforms serve two purposes:

  • Providing channels for upper-funnel awareness through editorial coverage, sponsored content, and targeted campaigns.
  • Generating data about advisor interests and research behavior.

Through symposiums and webcasts that help advisors maintain CE certifications, VettaFi gathers insights into which strategies and product characteristics advisors are actively researching, providing partners with intelligence that shapes product positioning and marketing messaging.

Digital marketing collaboration

Financial advisors increasingly rely on digital research when evaluating new investment solutions. As advisors monitor AI disruptions, regulatory changes, and market news, they research online and consume podcasts, videos, and other content. Bloomberg’s Future Focus: Financial Advisors in a Changing Landscape study revealed that 36% of advisors were checking financial news and seeking expert analysis more frequently than they were three years ago. Yet most asset managers, especially smaller firms, lack the digital infrastructure to reach advisors in these channels.

You need ongoing content production, social media management, SEO optimization, and audience development to build a meaningful digital presence. Sometimes, that means diverting resources from core investment functions for however long it takes to achieve significant organic reach, typically 18-24 months.

By contrast, VettaFi’s established digital ecosystem provides immediate access to engaged audiences. Paul Baiocchi, CFA, the Head of Fund Sales & Strategy at SS&C ALPS Advisors said, “VettaFi has become an extension of ALPS Advisors, and in a way it’s a massive part of our digital distribution strategy as we try and engage with advisors in various formats and platforms.” Over the course of the last three years of partnership with VettaFi, ALP Advisors has gathered over $3B in AUM. 

Our approach ensures asset managers achieve day-one visibility, accelerating the path from product launch to AUM growth.

What should asset managers look for when choosing an index provider?

The index provider landscape has plenty of capable firms, but not all partnerships are created equal. Here’s how asset managers can evaluate potential partners to find the perfect fit.

Look for providers with demonstrated expertise in your target asset classes and investment strategies

A partner with deep knowledge of the specific markets you’re addressing (whether fixed income, international equities, thematic strategies, or alternatives) will provide more valuable guidance throughout product development and bring more credibility with advisors.

Assess the full scope of services offered and how they align with your internal capabilities and gaps

If your firm has a strong marketing team, but limited data infrastructure, prioritize providers with robust proprietary data and analytics. If distribution is your primary challenge, focus on partners with established advisor networks and content platforms.

Evaluate responsiveness and cultural fit

The most valuable partnerships involve regular collaboration and quick turnaround on requests. VettaFi’s approach centers on end-to-end partnership, providing integrated solutions across indexing, marketing, data, and distribution rather than expecting asset managers to piece together services from different vendors. 

Consider the provider’s track record with similar products and their reputation within the advisor community 

Advisors are more likely to trust and recommend products built on recognized, respected index methodologies.

Finally, be realistic about costs and trade-offs

Expanded services command premium pricing, but for products with strong potential, the investment in a differentiated partner can deliver returns far exceeding the incremental cost.

 

Looking to build your next product with a modern index partner that’s more than just a benchmark? 

Contact us now to learn what active support throughout your product’s lifecycle can look like.

 

  • Accurate attribution is no longer optional.
  • As measurement techniques evolve, the ability to pinpoint exactly what drives conversion allows issuers to gain a competitive advantage.
  • Without an attribution strategy, firms face inefficient spend and a clouded view of their true performance.

The challenges facing marketers  

Marketers today face intensifying ROI pressure. In asset management specifically, where falling expense ratios and crowded markets are squeezing budgets, the ability to prove value is no longer optional. In B2B marketing, bottom funnel metrics can tie more closely to conversion, like webcast attendance and case study downloads. But the higher up the funnel you go, the harder attribution becomes. Brand awareness grows slowly and compounds, which means the value is real but not always immediately measurable. Lower funnel sales are easier to connect to conversion about it, but prioritizing them at the expense of brand building can result in hamstringing growth opportunities.

LinkedIn’s B2B ROI Impact Research1

Given that B2B sales cycles are longer than B2C sales cycles, telling the story of how any given marketing tactic is impacting the final purchase decision is daunting. In a recent virtual event, Ozzie Solares, Global Head of Integrated Media & Analytics at J.P. Morgan Asset & Wealth Management, noted “This is a challenging space. The landscape isn’t exactly doing us any favors.”

Some of these challenges in today’s landscape include:

Fragmented data: Data is everywhere, but it’s often trapped in silos. The real challenge for asset managers is identifying the most impactful data points and weaving them together to reveal a clear picture of performance.

Media spend takes time to show value: In today’s environment, where leadership is looking at ROI monthly, long term solutions are often tabled in favor of short-term tactical bets, creating additional challenges down the road.

Organizational data maturity: Data has become increasingly important, but not all organizations have fully evolved their data processes and governance. Smarter attribution frameworks can help address these challenges. Marketing results take time to manifest and marketers who lean into better attribution methodologies will have an easier time justifying additional investments to leadership.

1The ROI Challenge in B2B Marketing - And How AI is Changing the Game, LinkedIn, March 2025.

 

 

Stablecoin and its underpinning ecosystem have the potential to revolutionize the global payment system. But first, what is stablecoin? Stablecoins are tokenized cash issued on the blockchain, most commonly backed by fiat currency. It combines the stability of fiat currency or an underlying asset with the speed, security, and cost efficiency of blockchain technology. While you probably would not use Bitcoin to pay for your pizza given its volatility as a form of currency, you could pay for your pizza with stablecoin as a form of digital payment similar to using ApplePay, CashApp, or Venmo. A more common and ubiquitous use case for stablecoin than buying pizza is settling cryptocurrency trades. Given it is crypto native, stablecoin can facilitate faster and cheaper crypto settlement, allow traders to move funds more easily, support arbitrage opportunities between crypto exchanges, and provide on-ramps and off-ramps for fiat currency. 

Increasingly, stablecoins are becoming a core layer in the crypto economy for digital payments, lending, and tokenization of assets. Currently issued mostly in U.S. currency, McKinsey and company reports that stablecoin circulation has doubled over the past 18 months to $300 billion from $120 billion. Stablecoin transactions are forecasted to reach more than $400 billion in value by year-end 2025, and as much as $2 trillion by 2028. Stablecoin holds the potential to challenge the incumbent cash payment rail structure and permanently disrupt it.

Tokenized money

Tokenized money is a digital representation of a financial asset on a blockchain or distributed ledger. These tokens are essentially a digital claim on an underlying asset, and their ownership is recorded and managed by smart contracts. Tokenization technology is being adopted by major financial institutions and central banks to modernize payment systems and increase scale and efficiency. 

Tokenized money comes in many different forms, each with a unique issuer and underlying asset structure:

  • Bank-issued tokenized deposits or deposit tokens are digital representations of commercial bank deposits issued by banks, backed one-for-one by money on the bank's balance sheet. Because they are issued by regulated institutions, they are still subject to banking regulations and deposit insurance frameworks. One example is JP Morgan’s JPM Coin.
  • Central bank digital currencies (CBDCs) are digital forms of a country's fiat currency issued and backed by its central bank. A CBDC is the digital equivalent of cash and is a direct liability of the central bank similar to treasuries, making it a risk-free asset. They are designed to maintain a stable value relative to a traditional currency like the U.S. dollar by holding reserves. Examples include the People’s Bank of China’s e-CNY and the Eastern Caribbean Central Bank’s DCash (EC Dollar).

  • Stablecoins are cash-equivalent digital assets issued by a private entity, such as a licensed financial institution or a technology company. Stablecoins are designed to maintain a stable value relative to a traditional currency like the U.S. dollar and are backed by holding reserves.

Key benefits of stablecoin

A primary goal of asset tokenization is overcoming financial fragmentation. The world is increasingly interconnected across financial and trade flows, but our current global payment infrastructure is still very slow, inefficient, and unable to scale. Stablecoin was born out of a growing need for a more efficient cash payment system than those offered by legacy payment rails. 

Stablecoin-based payments are instantaneous, lower cost, have increased end-to-end traceability and visibility on-chain, and offer 24-7 on-chain liquidity. Stablecoin also provides expanded access and financial inclusion to the world’s unbanked population, given it is wallet-based rather than account-based. The benefits of stablecoin and its ecosystem are further detailed in the table below:

As a form of digital cash, consumers, merchants, and institutions can utilize the stablecoin ecosystem to transact in a variety of ways beyond just payment. Those include yield generation on savings, lending, and currency translation. Another key advantage of stablecoin for digital asset (DeFi) investors is that it keeps cash on-chain, avoiding having to toggle between the DeFi and traditional finance worlds. Today, nine out of 10 use cases for stablecoin are crypto-to-crypto transactions. However, other important potential use cases for stablecoin are becoming increasingly recognized.

Types of stablecoins

Not all stablecoins are created equal regarding the way they maintain their stable value. According to TRM Labs, more than 90% of fiat-backed stablecoins are pegged to the U.S. dollar, with Tether (USDT) and Circle (USDC) accounting for 93% of the total stablecoin market capitalization as of its latest report. But there are stablecoins tied to other asset types as well.

  • Fiat-Backed Stablecoins. Fiat-backed stablecoins have a 1:1 backing by a fiat currency such as the U.S. dollar, Euro, or British Pound. For each unit of stablecoin, an equivalent amount of fiat (or its equivalent) is held in reserve by the company. The leading issuers of fiat-backed stablecoins are Tether and Circle. This model requires trust in the issuer in addition to the issuing country/economic union of the pegged currency.
  • Crypto-Backed Stablecoins. Crypto-backed stablecoins are backed by cryptocurrencies such as Bitcoin or Ethereum. They are often over-collaterized to offset daily volatility.
  • Algorithmic Stablecoins. Algorithmic stablecoins utilize smart contracts to control supply and demand to maintain a stable value without relying on collateral. These stablecoins carry higher risk as they are subject to de-pegging in times of high volatility.

  • Commodity-Backed Stablecoins. Commodity-backed stablecoins are pegged to tangible commodities such as gold, silver, diamonds, and oil, offering a hedge against inflation and market volatility. Market fluctuations in the underlying asset can impact the stablecoin value. If this investment construct sounds familiar, it is basically equivalent to an on-chain version of a physical commodity ETF.

Stablecoins in circulation

The top ten stablecoin tokens by market capitalization, as of October 24, 2025, are:

  1. Tether (USDT). The first stablecoin, dating back to 2014, remains the most widely-used in the crypto space by trading volume. Pegged to the U.S. dollar, it is commonly used to provide liquidity for trades and DeFi activities. Tether’s market share leads with 58% of the market. 
  2. USDC (USDC). Initially issued by Circle and Coinbase under a consortium (now just Circle), it is backed 1:1 by the U.S. dollar. It was created in 2018. 
  3. Ethena USDe (USDe). Considered a next generation stablecoin, it mixes a hybrid design of crypto and algorithmic smart contracts to provide stability. It was created in 2023. 
  4. Dai (DAI). A decentralized stablecoin governed by MakerDAO (DAO).  Unlike fiat-backed stablecoin, DAI is backed by a mix of cryptocurrencies. Its algorithm adjusts collateral requirements to maintain its 1:1 peg to the U.S. dollar.  Dai is a cornerstone of the DeFi ecosystem, powering lending, borrowing, and yield farming applications in the MarketDAO ecosystem. DAI was created in 2017.
  5. PayPal USD (PYUSD). PayPal has entered the stablecoin market with a token built on top of its global payment network. Its stablecoin is fully backed by USD reserves and cash equivalents. PYUSD hopes to bridge the gap between traditional finance and the blockchain and is designed for retail and institutional use with applications for ecommerce, Web3 integration, and payments. 
  6. World LIbery Financial (USD1). This fiat-based digital asset is designed to maintain a stable value relative to USD, backed by U.S. dollars and other liquid assets. It was launched in April 2025 by World Liberty Financial. 
  7.  Falcon (USDf). A synthetic stablecoin developed by Falcon Finance, representing overcollateralized digital dollars that aim to combine security, flexibility, and sustainability in their design. USDf is not pegged to fiat by direct reserves but is minted against a diversified set of collateral assets.
  8. Global Dollar (USDG).  U.S. dollar-pegged stablecoin issued by Paxos Digital in Singapore.  USDG was launched November 1, 2024 by Paxos as the core asset of its Global Dollar Network.  USDG is designed to function across multiple blockchains and is used by a growing ecosystem of financial and crypto institutions including Kraken, Robinhood, Mastercard and Anchorage Digital. 
  9. Ripple USD (RLUSD). Ripple’s fiat-backed stablecoin was launched in 2024 and built on its Ripple blockchain payment network to facilitate low-cost global transfers. LIke the XRP token, Ripple is optimized for cross-border transactions and well suited for institutional customers. 
  10. USDD (USDD). This stablecoin was created by the TRON DAO Reserve which aims to maintain its 1:1 peg with USD using a system of overcollateralized crypto assets and a peg stability module (PSM) to help maintain its value. USDD was launched in 2022, amid the collapse of algorithmic stablecoin UST. 

Source: CoinMarketCap, MoonPay

The GENIUS Act and stablecoin regulation

The GENIUS Act (Guaranteeing Essential National Infrastructure in U.S. Stablecoins) was passed on July 17, 2025. It creates a new U.S. regulatory framework for payment stablecoin issuers to operate in the U.S. and for foreign entities to offer stablecoins to U.S. residents. It represents the first major cryptocurrency legislation passed by Congress.

The GENIUS Act addresses three major stablecoin concerns:

  1. Financial stability. It requires payment issuers to hold high-quality reserve assets safeguarded by qualified custodians, along with monthly reserve disclosures and published redemption policies. The Act also includes bankruptcy provisions to ensure stablecoin holders have priority claims on reserve assets.
  2. Cross border parity. Foreign issuers are subject to the same rules as U.S. issuers with regard to anti money laundering (AML) and sanction compliance provisions.
  3. Regulatory clarity. The act establishes a coherent regulatory framework for the stablecoin market in the U.S. in order to facilitate the enhanced adoption of digital assets and growth of the digital asset ecosystem. The framework also aims to attract stablecoin activity to the U.S. and increase demand for U.S. Treasuries.

Stablecoin regulation is also being implemented in other jurisdictions around the world.  In December of 2024, the EU’s Markets in Crypto-Assets Regulation, (MiCA) was implemented. While it does not refer specifically to stablecoins, it does address e-money tokens (EMT) backed by fiat currency. Under MiCA, only regulated e-money institutions or credit institutions can issue EMTs. Additionally, Hong Kong passed a Stablecoin Ordinance in May of 2025.  Under the law, all issuers of stablecoins backed by the Hong Kong dollar will need to obtain a license issued by the Hong Kong Monetary Authority. Stablecoins must be backed by high-quality, liquid reserve assets, and the market value of the reserve pool must be equivalent to the par value of the stablecoins circulated. Stablecoin issuers are also subject to strict regulatory requirements, including AML and CFT laws and regular audits and disclosure.

The passage of the GENIUS Act has paved the way for further institutional adoption and further expansion of the stablecoin ecosystem. JP Morgan predicts that “the Genius Act could further accelerate stablecoin adoption, moving this asset class more mainstream and further fueling the growth of this market.” The GENIUS Act creates a state and federal regulatory pathway to add new players to the stablecoin ecosystem, including non-banks, subsidiaries of insured depository institutions and state-chartered entities.  However, these issuers will be prohibited from offering yield or interest, so as not to compete with interest-bearing bank and money market deposits. 

According to a new report from TRM Labs, stablecoins now comprise 30% of all on-chain crypto transaction volume, exceeding more than $4 trillion for the year, and representing an 83% increase over the same period in 2024. 

Already, passage of the GENIUS Act and Solana ETFs have accelerated Solana's stablecoin growth over the last three months by 40%, outpacing Ethereum's 27% expansion over the same period. Circle's USDC dominates 77.4% of Solana's stablecoin market. While Ethereum still maintains a 60% share of the stablecoin market, versus Solana’s smaller 4.5% share, Solana is increasingly becoming a hub for on-chain activity, with faster throughput and cheap fees. 

Growth projections for stablecoin

As seen in the chart below, the market capitalization for stablecoin surged from $5 billion in 2020 to $290 billion in September 2025, with initial estimates projecting a rise to $310 billion at the end of the year. 

Market cap surged from $5bn (2020) to $290bn (Sep 2025)

Stablecoin now rivals some of the largest payment networks in terms of transaction volume, and adoption is accelerating. According to the latest Artemis Analytics data, global stablecoin transaction volumes soared 72% in 2025, hitting $33 trillion, recording $11 trillion in transactions in just the fourth quarter alone.

While projections for the overall stablecoin market growth vary, analysis consensus is forecasting growth of between $2 and $4 trillion by 2030, with the U.S. Treasury projecting $2 trillion by 2028.  

Here are some other top growth projections for stablecoin:

  • Coinbase: Projects $1.2 trillion by the end of 2028.

  • Standard Chartered: Projects $2 trillion by 2028.

  • Citi: Projects $2 trillion by 2028 and up to $4 trillion by 2030.

  • Deutsche Bank Research: Projects $2 trillion by 2028.

  • J.P. Morgan: Believes $2 trillion by 2028 is "optimistic" and projects a range of $500–$750 billion in the coming years, citing undeveloped infrastructure. 

The eventual accuracy of these projections will depend on the pace of institutional adoption, regulatory outcomes, and the ability to integrate stablecoin and next-gen payments into the traditional global financial ecosystem.  Major payment enterprises and traditional finance entities are fast realizing the need to become part of the stablecoin ecosystem.  

The future of stablecoin

What does the future hold for stablecoin? Here is a brief glimpse:

  • Banks will be issuing their own stablecoins;

  • Stablecoin issuers like Circle will launch payment networks;

  • Ecommerce giants Amazon and WalMart will issue stablecoins;

  • Ecommerce platforms like Shopify will offer plug-ins for seamless crypto payment;

  • Money transfer platforms like Zelle will integrate stablecoin functionality;

  • Financial technology leaders like Stripe will enhance their payment rails via strategic acquisitions like its $1.1 billion acquisition of Bridge;

How can investors get access to the growth potential of the stablecoin ecosystem?  

Our index approach 

The VettaFi ROBO Stablecoin Ecosystem Index (PEGG) is an index of global companies that tracks companies strategically positioned to enable the development, adoption, and operation of stablecoins across the digital asset landscape, including those involved in issuance, custody, reserve management, infrastructure, and payment solutions.

For more information about the VettaFi ROBO Stablecoin Ecosystem Index (PEGG), click here.  The index has been licensed by Grayscale for the Grayscale Stablecoin Ecosystem ETF (PEGG), expected to launch in February 2026.

Nuclear energy has seen a hot start to 2026, benefitting from positive sentiment around artificial intelligence, ongoing support from the US government, and notable nuclear news from Meta (META). With only a few trading days in the books, some names in the VettaFi Nuclear Renaissance Index (NUKZX) are already up over 35% year to date through January 8. 

That is before factoring in strong performance on Friday following announcements between Meta and NUKZX constituents, Oklo (OKLO) and Vistra (VST). At writing, OKLO and VST were up over 12% intra-day on January 9. Meta is partnering with OKLO to power its data centers in Southern Ohio and will help with funding the project by pre-paying for power. Meta also agreed to purchase nuclear power from Vistra, inking a 20-year power purchase agreement for over 2,600 megawatts. (Read more.) 

More broadly within NUKZX, the strength so far has largely come from select names in the fuel and advanced nuclear categories. As shown below, advanced nuclear includes Nano Nuclear (NNE), NuScale (SMR), and Oklo, which were up over 35% year-to-date through January 8. These developers of small modular reactors (SMRs) tend to be sensitive to sentiment for artificial intelligence, which has been strong to start the year.

NUKZX Exposure

DOE award drives mixed performance in fuel

Within Fuel, Centrus Energy (LEU) is up 17.9% through January 8 after announcing a $900 million task order from the U.S. Department of Energy to expand its Ohio enrichment facility to produce High-Assay, Low-Enriched Uranium at commercial levels. The award was part of a competitive process and was included in a 2024 bipartisan funding package. 

In total, the DOE awarded $2.7 billion in task orders for uranium enrichment, with two other companies receiving $900 million each. With energy security at the forefront, the government is clearly focused on supporting domestic enrichment for existing reactors and eventually advanced reactors. 

As part of the announcement, Global Laser Enrichment, which is owned by Cameco (CCJ) and Silex Systems (SLX AU), was awarded $28 million. SLX is off 20% to start the year through January 8, given disappointment around not winning the larger task order. The contrasting performance of LEU and SLX provide yet another example of why it can be difficult to stock pick in the nuclear space. 

Diversification still en vogue in 2026

Diversification remains a key benefit of the index design for NUKZX. CCJ, SLX, and LEU are all in the index. However, the weakness in SLX is less impactful in a diversified index with 44 constituents. 

With the really strong start to the year, risk is probably not top of mind. Investors should note, though, that execution risk is a reality in the nuclear space. There are pre-revenue companies and names pioneering new technology. Diversification helps mitigate the impact of these risks. Additionally, the utilities and construction & services segments within NUKZX can provide more stability and offset to a degree some of the execution risk found elsewhere in the basket. 

NUKZX is the underlying index for the Range Nuclear Renaissance Index ETF (NUKZ). 

This article was originally published January 12th, 2026 on ETF Trends.

A recent poll of financial advisors confirms that interest in the “nuclear renaissance” investment case is driven by several distinct tailwinds. When asked what they find most interesting about the sector, the responses revealed enthusiasm for new technology, built upon an appreciation for the fundamental benefits of nuclear power.

Growth potential of small modular reactors

The top response to what they find most interesting about the sector, cited by 35% of advisors, is the growth potential of small modular reactors (SMRs). This highlights a significant interest in the innovation and technological evolution shaping the industry’s future. SMRs represent a major shift from conventional, large-scale projects.  They focus instead on modular construction and the flexibility to deploy nuclear power in new applications. This could include providing high-heat industrial power for chemical companies or securing reliable energy for remote data centers and military bases.

Potential benefits as an AI adjacency

Following closely, 22% of advisors pointed to nuclear’s potential benefits as an AI adjacency. This is arguably the most powerful new demand driver the sector has seen in decades. Industry leaders now recognize that reliable electricity is the “central rate limiter of AI” , with power demand expected to grow “basically parabolic”, Range Fund Holdings CEO Tim Rotolo said during a recent webcast.

This has pushed major technology companies, whose business models are now reliant on access to power more than ever before, to become vocal supporters and financial partners in nuclear development, Rotolo added.

Other tailwinds for nuclear energy

The remaining respondents showed interest in the core, traditional strengths of nuclear power. 18% cited carbon-free power generation, recognizing nuclear as one of the few solutions that enables both decarbonization and economic prosperity. Another 13% pointed to reliability and decades of operation. This is nuclear’s core strength. It provides true 24/7 baseload power, with the highest capacity factor of any energy source per Rotolo, and a lifespan that can extend to up to 100 years. Finally, 11% of respondents cited energy and national security benefits. This underscores the growing consensus that energy security is national security. Additionally, domestic power generation is a critical strategic asset.

The poll results demonstrate that the investment case for nuclear energy is not a single-issue trend. It is a comprehensive narrative where new-age growth drivers like SMRs and AI are being built upon the foundation of clean, reliable, and secure baseload power.

This article was originally published November 6th, 2025 on ETF Trends.

  • The nuclear energy universe spans from uranium mining to developers of advanced reactors to utilities generating electricity from nuclear reactors, with very different risk profiles across the value chain. 
  • Given the diversity of nuclear-related stocks, index construction is particularly important for investors looking to access the space through an ETF.
  • Uranium mining can be volatile and comes with idiosyncratic risks. 

Nuclear-related stocks have seen significant positive momentum this year. In addition to policy tailwinds, investors are recognizing the critical need for reliable, carbon-free power generation for years to come. Nuclear represents a compelling opportunity in that vein. Nuclear-focused ETFs have seen some of the strongest inflows within the broader energy complex over the past year. 

For investors who are new to the nuclear space, it can be difficult to determine the best way to gain exposure. Investors may be considering uranium miners or direct uranium exposure, utilities operating nuclear plants, or the supporting companies involved in engineering and construction. 

There are also several developers of small modular reactors (SMRs) with exciting potential but also execution risk. Clearly, there are different investment characteristics for a pre-revenue SMR developer like Oklo (OKLO) and a utility like Vistra Energy (VST). However, both are part of the nuclear power universe.

NUKZ: A thoughtful approach to nuclear

Given the diversity of the nuclear-related companies and their risk profiles, index construction is particularly important and requires distinct expertise. The Range Nuclear Renaissance Index (NUKZX) was designed with a focus on diversification and maximizing risk-adjusted returns. The global index includes four categories with specific weightings. Construction and Services is capped at 35%, followed by Advanced Reactor and Utilities at 30% each, and Fuel at 20%. 

Caps for individual companies result in beneficial diversification. Pre-revenue and pure-play constituents are capped at 10%, while diversified names like Fluor (FLR) and Dominion Energy (D) are capped at 3%. The index currently has 44 constituents, as shown in the infographic below. 

By design, the index includes the exciting developments in advanced reactors, including SMRs, without being overexposed to one company or one technology. The pre-revenue, more speculative companies are balanced by the steadier exposure to construction and services and utilities. Utilities have historically been known for their defensive characteristics. 

Why uranium mining isn’t featured.

Notably missing from the diagram above is uranium mining. Uranium miners have typically been more volatile due to missed production estimates or geopolitical issues. One example is companies mining uranium in Niger and challenges resulting from a coup d’etat in 2023. Uranium miners also tend to be known for dilutive equity raises. 

The Fuel category was intentionally capped at 20% to limit exposure to the idiosyncratic risks associated with uranium mining. Companies in the index tend to be more focused on uranium enrichment or conversion. Cameco (CCJ) stands out for having exploration and mining, but its business is uniquely integrated and includes a 49% interest in Westinghouse. The remaining fuel companies are not involved in mining. 

Bottom line

The breadth of nuclear participants and their distinct risk profiles requires thoughtful index construction. The NUKZX index was developed with a focus on both diversification and maximizing risk-adjusted returns. 

NUKZX is the underlying index for the Range Nuclear Renaissance Index ETF (NUKZ).

This article was originally published October 27th, 2025 on ETF Trends.

 

Thematic investing has become a popular way for investors to get targeted exposure to specific investment themes, market trends, and values. Thematics can provide exposure to unique opportunities not captured by traditional sectors or allocations. But what are the characteristics that make for a good investment theme?  

We have covered this topic in the past in our paper Investing in Thematics, but to summarize here:

Trend, not a fad — A good theme is a long-term, durable trend with far-reaching disruptive implications, not a transient fad. Simply put, today’s theme is tomorrow’s sector. A good way to distinguish an investment theme from a fad is that it has economic underpinnings supporting its investment thesis. NFTs and SPACs are two recent ETF investment themes that failed to succeed for that reason.  

Megatrends — Some themes are so disruptive and far-reaching in their impact that they qualify as “megatrends.”  Megatrends are long-term, secular trends with a global scale, such as climate change, demographic shifts, digitalization, decentralized finance, and, most recently, artificial intelligence. 

Underlying regulatory support — When thematic disruption and government regulation align, it can help propel an investment theme.  

Investable themes — Often a theme is so nascent that it is not yet investable as there are too few companies with “pure-play” exposure. Investors need to ask themselves, are these companies really a good proxy for this investment theme? Do these companies derive meaningful revenue exposure from the theme, and/or are they dominant players?

Exponential growth — Linear thinking often underestimates the parabolic growth potential of exponential, transformative change. Think about the recent inflection point in artificial intelligence created by the generative AI moment and the subsequent “hockey stick” pattern of surging growth and investment.

Challenges of thematic investing

Timing - One of the key challenges of thematic investing is picking the right theme at the right time. Despite their long-term potential, investment themes, like stocks themselves, often experience pullbacks or setbacks and are not on a straight upward trajectory.

Selection/Allocation decision — Another challenge for thematic investors is which themes to select and how much to allocate to them as investments. And what is the appropriate percentage allocation to thematics in general?  

Few “pure play” companies — As mentioned, with nascent themes, it is often difficult to get “pure-play” exposure from publicly traded companies without sacrificing diversification. There may only be a handful of public companies actually deriving meaningful revenue from a theme. 

Overlapping exposure — A company such as Nvidia is involved in many important themes, from artificial intelligence to video gaming to autonomous vehicles and robotics. As a result, investors investing in multiple themes can easily become overexposed to specific companies. 

Trading and tax considerations — Even if you get the timing right on a theme, trading is often constrained due to capital gains and other tax considerations. 

Thematic rotation offers a solution

The VettaFi Index team has come up with an index solution that solves many of the challenges associated with thematic investing.  

Factor-based timing — Each quarter, the index selects the top themes based on a combination of aggregate quality and momentum scores to form an equal-weighted thematic index portfolio. 

Turn-key thematic solution — Our index approach solves for “where do thematics fit into your portfolio.” Rather than leaving it to the investor to select the “best theme” on a timely basis, theme selection and weighting allocation are determined cross-sectionally, based on systematic, definable investment factors for the aggregate theme. The end result is a turn-key thematic solution.

Allows for pure-play exposure to nascent and sub-themes — Product issuers often face delays getting new themes to market. With our index approach, nascent themes (such as quantum computing) and sub-themes (like humanoid robots) can be included on a more timely basis, even if they do not yet meet the diversification requirements for an ETF index.  

Overlapping exposure adjustment — If a company appears in multiple themes, its weight is the sum of its individual weights across those themes. A single-stock weight cap of 8% is applied to avoid overconcentration in any particular company.

Solves for trading and tax constraints — Our multi-thematic index rotation solution solves for trading and tax implication constraints. 

Our index approach 

The VettaFi Thematic Rotation family of indexes utilizes a systematic approach designed to provide tactical rotation to relevant themes. This strategy aims to address the non-linear and dynamic nature of innovation in thematic investing, providing investors with timely exposure to investment themes.

The first live example of this index approach is the VettaFi Thematic Rotation Quality Momentum Index (TRQM). The Index is reconstituted quarterly and composed of VettaFi’s top themes, as measured by momentum and quality, from VettaFi’s theme universe. The selected themes are equally weighted to form a thematic index portfolio composed of the current highest-rated themes. 

Universe:

Constituents of portfolios that represent themes in VettaFi’s theme universe. The Universe is composed of themes that are VettaFi index or sub-index themes. The Index Committee is responsible for making decisions on theme inclusion when there are questions regarding representation or eligibility.

Constituent selection:

Each theme receives a composite score, weighted between Momentum (40%) and Quality (60%) components. Themes are ranked by composite score, and selected in descending order until at least 7 themes and 125 companies are represented. When two themes have common ICE sub-industries that overlap by 40%, only the theme with the highest score is kept.

Constituent weighting & constraints:

Each selected theme is equally weighted. Within themes, companies are weighted proportionally to their weight in the underlying theme. If a company appears in multiple themes, its weight is the sum of its individual weights across those themes. A single-stock weight cap of 8% is applied, with any excess redistributed back to the corresponding themes on a pro-rata basis.

Rebalancing:

Quarterly March, June, September, and December.

For more information about the VettaFi Thematic Rotation Quality Momentum Index (TRQM), click here. Our Thematic Rotation index approach can be applied using multiple factor inputs and across different sizes and investment universes.

The exchange-traded fund (ETF) market operates on a foundation most investors never see: the creation-redemption process. 

ETF authorized participants — specialized financial institutions that act as a link between ETF issuers and the market — are at the heart of this process. If you’re an asset manager launching or managing an ETF, understanding the nuances of the authorized participant relationship is critical for your fund’s success and liquidity. 

Here’s everything asset managers need to know about ETF authorized participants, from how they function to what to consider when selecting and managing them.

Understanding the role of ETF authorized participants 

Authorized participants (APs) are financial institutions that sign an agreement with ETF distributors, granting them the exclusive right to create and redeem shares for specific ETFs. These signed agreements outline the terms, responsibilities, and fee structures that govern the relationship. 

APs have several key responsibilities:

  • Acting as primary market dealers: They exchange baskets of securities with the ETF provider for blocks of new ETF shares (creation units), typically in blocks of 50,000 shares.

  • Meeting market supply and demand: When investor demand for an ETF increases, APs execute the necessary trades to create new shares and bring them to market.

  • Maintaining liquidity: APs keep an ETF’s market price as close as possible to its net asset value (NAV), which is essential for investor protection and market efficiency.

  • Enabling faster response times: While most ETF trading occurs in the secondary market during the trading day, APs can quickly create new shares when market supply cannot meet demand.

  • Providing tax efficiency: APs help ETFs avoid realizing capital gains that would otherwise be distributed to shareholders, providing a significant advantage over mutual funds.

Authorized participants vs. market makers

While related, APs and market makers have different duties.

Market makers:

  • Provide liquidity in the secondary market.
  • Quote bid and ask prices throughout the trading day.
  • Facilitate trading of existing ETF shares

Authorized participants:

  • Create and redeem ETF shares in the primary market.
  • Maintain the NAV arbitrage mechanism.
  • Typically operate in larger block sizes (such as creation units).

It’s worth noting that some APs are also market makers. Many large financial institutions play both roles, which can enhance ETF liquidity.

Understanding the creation-redemption process

Authorized participants buy the securities in the ETF’s portfolio, then form a creation basket. That creation basket goes to the ETF issuer, and the AP receives a new creation unit in return. APs can also purchase creation units with cash rather than by exchanging actual securities.

The reverse process uses redemption baskets. When APs redeem creation units, they receive baskets of the underlying securities from the issuer.

Creation process

Here’s a step-by-step breakdown of the creation process:

  1. The authorized participant identifies an arbitrage opportunity (i.e., the ETF is trading at a premium to the NAV).
  2. They assemble a basket of the underlying securities.
  3. They deliver the basket to the issuer.
  4. The issuer creates new ETF shares and delivers a creation unit to the AP.
  5. The AP sells these shares in the secondary market to capture arbitrage profit.

Understanding this process helps you anticipate when creations will occur and plan for the operational requirements. Work with your APs to establish procedures for basket delivery timing, settlement protocols, and communication.

Redemption process

Here’s how redemption works, from start to finish:

  1. The authorized participant identifies an arbitrage opportunity (i.e., the ETF is trading at a discount to the NAV).
  2. The AP will buy shares in the secondary market.
  3. Next, the AP accumulates a full creation unit.
  4. They redeem the creation unit with the issuer for a redemption basket (the underlying securities).
  5. The authorized participant then sells the underlying securities or holds them.

Redemptions can signal investor outflows or broader market stress, so monitoring redemption patterns helps you understand fund health. If redemptions suddenly spike, communicate with your APs to make sure they have the operational capacity to handle higher activity.

In-kind vs. cash transactions

APs can use both in-kind and cash transactions.

In-kind transactions are preferred for most equity ETFs, as they maximize tax efficiency. These transactions avoid fund-level capital gains and are often cheaper and faster to execute.

Cash transactions tend to be preferred in fixed-income ETFs, international markets with settlement challenges, and certain commodities ETFs. Cash is better suited for complex assets but can lead to tracking errors.

Tax efficiency

One of the most important benefits APs provide is tax efficiency. Through in-kind transactions, APs enable ETFs to minimize or eliminate capital gains distributions to shareholders. When securities are exchanged for ETF shares (rather than sold for cash), no taxable event occurs at the fund level.

This allows ETFs to avoid the capital gains distributions that mutual funds regularly pass through to their individual investors. Asset managers who want to attract tax-conscious investors should prioritize APs experienced in executing efficient in-kind transactions.

How authorized participants influence ETF liquidity and pricing

Authorized participants are critical to a fund’s ecosystem for several reasons:

They maintain liquidity

By creating a large number of shares in the primary market to meet ETF investor demand in the secondary market, APs serve as stewards of liquidity. Remember: ETF liquidity extends beyond shares outstanding and is primarily determined by the liquidity of the underlying holdings.

They align the ETF’s price with its NAV

Maintaining alignment between an ETF’s market price and its net asset value improves risk management, reduces arbitrage opportunities, and protects client investments. Typical tracking spreads are measured in basis points during normal market conditions. APs can act quickly to handle arbitrage situations and keep an ETF in line with its NAV.

They eliminate pricing discrepancies

When ETF shares trade at a premium or discount to NAV, AP arbitrage activity eliminates these discrepancies and ensures the price of the ETF share trades at fair value relative to the underlying assets.

They can stabilize the fund

In stressed market conditions, APs can tilt redemptions toward underlying assets with less liquidity to stabilize the fund. This capability is critical during times of market duress and volatility.

Market stress scenarios and AP limitations

While APs are essential to ETF functionality, they face limitations, especially during market stress. Asset managers who understand these constraints can better prepare for periods of volatility.

Recent market stress: March 2020

The pandemic created enormous stress on financial markets in March 2020. Fixed-income ETF premiums and discounts widened significantly, and APs worked to stabilize pricing in response. However, many funds experienced temporary dislocations.

The market normalized within weeks, demonstrating the AP system’s resilience as well as its limits.

When authorized participants step back

APs must sometimes reduce their creation and redemption activity due to:

  • Capital constraints
  • Risk management concerns about initiating trades
  • Operational obstacles

The role of basket transparency

Non-transparent or semi-transparent ETF structures can affect AP behavior, too. Semi-transparent ETFs often use a proxy basket of underlying securities, which may reduce an AP’s willingness to create or redeem shares compared to fully transparent structures.

Liquidity cascades

When investors rapidly sell off securities, it can create a liquidity cascade where APs struggle to sell the underlying securities of an ETF. Any market stress that makes securities more challenging to trade can create issues for the creation-redemption process. 

Building strong relationships with ETF authorized participants

If you’re an asset manager who’s choosing an AP for your ETF, here’s what you need to know.

Selecting APs

Look for authorized participants with these qualities:

  • Asset class expertise: Choose APs with deep experience in your specific asset class, geographic region, and investment strategy.
  • Financial stability: Partner with financial institutions that maintain strong balance sheets to support creation-redemption activity during volatile periods.
  • Compliance history: Verify that potential APs have a history of compliance, as well as a comprehensive compliance program in place. Review any regulatory actions, fines, or settlements.
  • Operational efficiency: Ensure your AP has the infrastructure to execute creations and redemptions smoothly, including settlement infrastructure, custodial relationships, and technology platforms.
  • Geographic reach and time zone coverage: For international ETFs, confirm your AP can operate effectively across relevant geographic regions and time zones.
  • Track record: Request references from other issuers before engaging with an authorized participant.

How many APs does your ETF need?

ETFs can have twenty to thirty authorized participants, but usually only a handful create and redeem shares. ETFs with more assets under management (AUM) and foreign underlying securities typically require more APs than funds with fewer assets.

A larger number of APs can help maintain liquidity, but quality matters more than quantity. Two to three highly engaged APs can outperform twenty disengaged ones.

The ideal approach: Start with a few committed APs and expand as the ETF grows. For international ETFs, ensure you have APs based in multiple time zones.

Negotiating AP agreements

As you set up your operation agreements, here’s what to consider:

  • Standard vs. custom basket provisions.
  • Cash vs. in-kind specifications.
  • Error-handling and dispute-resolution procedures.
  • Confidentiality and information-sharing processes.

Request a copy of the AP’s agreement template early so your legal team can review it well before you prepare to launch. Many provisions are negotiable even if they appear standardized, especially fee structures, basket customization rights, and cutoff times. 

Be wary of red flags like one-sided error liability or a lack of clear dispute-resolution procedures. It’s best to seek out relationships with APs who demonstrate flexibility and a willingness to understand your specific asset class needs.

Fee structures and economics

Consider the typical fee for each creation-redemption transaction. Fees may vary based on factors like:

  • Asset class complexity: Simple equity ETFs vs. fixed-income, international, or alternatives.
  • Transaction type: Cash transactions usually cost more than in kind.
  • Basket complexity: More securities or illiquid holdings mean higher fees.
  • Volume: Higher expected activity may yield better per-transaction rates.

Conduct a break-even analysis: At what AUM do creation-redemption economics make sense? Factor AP fees into your expense ratio projections and decide whether you’ll absorb those costs during launch or pass them through. 

Managing relationships

Here are some tips for successfully managing an ongoing relationship with an authorized participant:

  1. Communicate regularly: Conduct quarterly reviews and discuss market conditions.
  2. Monitor performance: Track key performance indicators (KPIs) like creation-redemption frequency, pricing accuracy, and response times.
  3. Know when to expand: Understand the signs indicating you need to add more APs to your roster.
  4. Know when to remove: Recognize red flags for poor performance and have a clear disengagement process.
  5. Contingency planning: Maintain backup APs and develop disaster recovery scenarios.

Document all interactions, performance data, and issues in a centralized system your entire team can access, ensuring access to objective data for strategic planning.

Regulatory considerations

When it comes to regulatory concerns, asset managers must address:

  • SEC requirements for AP agreements and disclosures.
  • Form N-1A and prospectus disclosure obligations.
  • Oversight and monitoring requirements.
  • Material changes that require board or regulatory approval.

Also, make sure you have a clear workflow for approvals:

  • Who reviews AP agreements?
  • Who monitors compliance?
  • When does the board get involved?

Missing these steps can create regulatory deficiencies. Put together a checklist that covers legal reviews, board reviews, and disclosure updates. Update Form N-1A when adding APs or making material changes. 

Red flags and warning signs

Watch for these warning signs in your AP relationships:

  • Declining creation-redemption activity.
  • Widening premiums-discounts that persist longer than usual.
  • Settlement failures or operational errors.
  • Lack of responsiveness to inquiries.
  • Financial instability or regulatory problems at the AP’s firm.

Review AP performance regularly. If a problem arises, document it and address the concern directly with the AP. If performance doesn’t improve after reasonable opportunities to correct course, start building backup relationships so you don’t end up in a situation where terminating a poorly performing AP leaves your fund without options.

Key takeaways for asset managers

Authorized participants are the invisible infrastructure that makes ETFs work. For asset managers, understanding and managing these relationships is critical to fund success.

Remember:

  • Quality over quantity: A couple of engaged, capable APs will outperform several disengaged ones.
  • Plan for stress: AP limitations during market volatility are normal, so have a contingency plan.
  • Tax efficiency matters: In-kind transactions are one of the greatest competitive advantages of the ETF structure.
  • Due diligence is essential: Thoroughly vet the AP’s financial stability, expertise, and compliance history.
  • Active management required: Monitor AP performance regularly and maintain open communication.

Building and actively managing AP relationships throughout your ETF’s lifecycle will ensure optimal liquidity, pricing, and tax efficiency for your investors.

Need to better understand authorized participant trading patterns? VettaFi provides the market intelligence to optimize these relationships. Contact us today to learn how we can strengthen your AP partnerships.

FAQs about ETF authorized participants

Can an ETF operate with only one authorized participant? 

Yes, but it’s risky. Being dependent on a single authorized participant means that if the participant steps back due to capital constraints, market stress, or other concerns, your ETF has no creation-redemption mechanism. New ETFs with simple asset classes can start with one authorized participant but should add more as they grow.

What happens if all APs stop creating and redeeming shares? 

If all APs stop participating, the ETF effectively becomes a closed-end fund and its share price can diverge significantly from NAV. Without the creation-redemption mechanism, investors can only trade in the secondary market, where spreads widen and liquidity deteriorates. This is rare and typically only occurs during extreme market stress or with very small funds. Asset managers can prevent this by prioritizing financially stable partners and having contingency plans for market volatility.

How long does the creation-redemption process typically take?

The "primary market" transaction between the AP and the ETF issuer typically follows the standard T+1 or T+2 settlement cycle (one to two business days after the trade). While the AP and issuer agree on the basket exchange almost instantly, the physical transfer of underlying securities and the delivery of new ETF shares must clear through central clearinghouses like the NSCC.

Do authorized participants charge fees for every creation and redemption?

Yes, authorized participants typically charge transaction fees to cover their operational costs. However, fee structures are negotiable and vary based on your agreement with each authorized participant. Factors like asset class complexity, basket size, and whether transactions are in kind or cash based will impact the amount of the fee. Asset managers should negotiate fees upfront and factor them into the ETF’s overall cost structure.

How do non-transparent ETFs work with authorized participants?

Non-transparent ETFs use proxy baskets instead of revealing actual holdings to authorized participants. Authorized participants must create and redeem shares based on these representative portfolios rather than the fund’s exact composition, which increases their operational risk and complexity. This typically results in higher fees, wider spreads, and fewer willing participants compared to fully transparent ETFs.

 

As we navigated the markets in 2025, several key global and technological trends defined investment strategies throughout the year. VettaFi's investment research highlights opportunities created by structural transformations in the physical world, from the re-industrialization of Europe and the AI-driven evolution of real estate, to the critical demand for power infrastructure. Explaining the tactical nuances of accessing asset classes like energy infrastructure and gold miners are just two examples of the investment research we provide.  Explore our research articles driving index development today.

Explore the latest articles:

  1. The Re-industrialization of Europe: Discusses Europe’s strategic push for autonomy through massive investments in defense capabilities (EDIS), energy independence (REPower EU), and supply chain resilience.

  2. How Gold and mining stocks weather uncertainty: Examines why gold miners can offer a "leveraged play" on gold prices and how central bank buying is reinforcing the metal's status as a hedge against currency debasement and fiscal instability.

  3. How AI and robotics are transforming real estate: Explores how automation is reshaping the entire real estate value chain, from AI-guided construction and "smart building" operations to data-driven property valuation models.

  4. Why most 'MLP ETFs' own less than 25% MLPs: Meaningful for investors seeking energy income, this piece details the crucial tax differences between C-Corp structured funds (100% MLPs) and RIC-compliant funds (capped at 25% MLPs).

  5. AI infrastructure: Growth too big to ignore: Highlights the "next phase" of the AI trade, focusing on the massive capital flowing into the physical backbone—data centers, power grids, and cooling systems—required to sustain generative AI's growth.

Conclusion

As 2025 ends, our research underscores that the most compelling strategic investments are often found in the physical foundations of the global economy. The convergence of industrial autonomy, real asset transformation, and the infrastructure needed to power the AI revolution will likely remain primary drivers for index performance and thematic interest as we move into the new year.

Asset managers looking to set themselves up for success in 2026 will benefit from these six articles. Building and maintaining a successful product can be a daunting challenge, but these insights were repeatedly leveraged by asset managers looking for nuanced, actionable information. Below are our most important articles from the previous year.

The 6 articles every asset managers should read

Best practices for launching an ETF. If you want to successfully launch an ETF, start by knowing the best practices. This is the ultimate guide to how to launch an ETF — from analyzing the market and choosing the right partners to regulatory compliance and digital marketing strategies.  

Index rebalancing: Process and best practices for asset managers. Index rebalancing is a periodic process of adjusting an index’s composition and weightings to maintain its investment goals. The way an index is weighted ensures a product is accurately exposed to the securities and assets that best fulfill that purpose.  

ETF vs Mutual fund: 9 strategic considerations for asset managers.  An asset manager’s ultimate goal is to choose the right investment vehicle that financial advisors and investors will actually want to use. The best products can solve real investor problems while covering gaps in exposure. When it comes to packaging these solutions, asset managers have two core investment options: exchange-traded funds (ETFs) or mutual funds. Each wrapper comes with distinct advantages, but understanding the key differences is essential for bringing the most value to investors.
 
Calculating the true cost of ETF index maintenance. With almost 4,000 exchange-traded funds (ETFs) on the market, investors are gravitating toward those with lower expense ratios — making low-cost operations a necessity. There are unavoidable admin fees and operational expenses associated with every fund, but streamlining your ETF index maintenance costs can give you an edge. Lowering maintenance costs also lowers your fund’s expense ratios, which means investors are far more likely to invest in your product.
 
How to find the right ETF service provider.  Picking the right index service provider can make or break your new ETF product.  With nearly 4,000 ETFs competing for shelf space in the United States alone, in today's competitive ETF ecosystem, issuers need an ETF services partner as invested in the asset growth of the product as they are.
 
How asset managers are using analytics to distribute ETFs and connect with advisors. Asset managers are increasingly turning to analytics to optimize how they improve fund distribution, strengthen advisor relationships, and provide investment opportunities. Using data to better understand and analyze the problems facing investors can significantly boost fund flows and performance. 

Conclusion

Launching, maintaining, and operating an ETF is a huge undertaking. But with the right partners and careful planning, you can bring your unique investment ideas to the market and illuminate a previously invisible opportunity for investors.

Looking for the right partner? Reach out to VettaFi now.

Before we close on 2025, we’ve rolled out a few key updates. From powering international ETF launches to enabling a more seamless flow of behavioral data into your internal systems, these updates are designed to streamline how you build products and how you sell them.

1. Growing globally: New ETF launches

We are proud to be powering several high-conviction international launches this month. Two funds from HANetf are now live and capture critical global shifts:

2. A solution for thematic timing challenges

Thematic investing often presents challenges with market timing and the absence of "pure play" companies. Our latest index (TRQM) provides a turn-key solution to these hurdles.

The benefit: It automatically manages thematic overlap, sector allocation, and tax/trading constraints, allowing for a more sophisticated approach to thematic exposure. Explore the index further.

3. Targeted exposure in fixed income

In response to client demand for more targeted snapshots of the bond market, we have launched a new suite of Beta Indices:

  • Broad Europe Index: Tracking EUR debt from non-North American issuers.

  • EM Sovereign Bond Index: Tracking USD-denominated sovereign debt issued by EM countries.

  • EM Corporate Bond Index: Tracking USD-denominated corporate debt issued by EM countries.

These indices provide granular exposure and, when paired with our Index Analyzer, allow for deep-dives into constituent-level performance drivers. 

Dive into our FI strategies.

4. Connect your CRM to our advisor data

We’ve removed the friction between our behavioral data and your sales enablement tools. We can now efficiently connect a data feed to your CRM!

Why it matters: You can now pull our unique advisor engagement data and lead intelligence directly into your sales enablement tools. This allows your team to stay within their primary environment while leveraging our behavioral insights. And this is just the beginning, stay tuned for further integration features in early 2026.

5. New lead intel: Ticker engagement dates

Advisor profiles on our Investor Behavioral Intelligence (IBI) platform now include more complete timelines of advisor intent.

  • The update: "Engagement Dates" are now available for ticker interactions.

  • The impact: You can now see the specific engagement dates for both digital tactics (ie. virtual events, newsletters) and ticker-level research on ETFdb.com. This dual-view allows for improved qualification, helping you know exactly when and how an advisor is engaging with your specific products over time.

  • Login to your IBI account to see the updates or chat with your VettaFi digital distribution rep to unlock these capabilities.

Looking ahead

2026 is gearing up to be an exciting  year for us. We'll continue to provide updates across index innovation and enhancements in our digital platform.

Investors in gold miners and physical gold have been rewarded, given its “safe haven” status as a hedge against global uncertainty. Macroeconomic and geopolitical factors such as declining interest rates, rising fiscal deficits, tariff trade policies, and global geopolitical tensions have sparked concerns about “debasement” or the devaluation of fiat currency. The “debasement” trade has investors moving out of assets denominated in fiat currency and government debt into hard assets such as gold.

Physical gold on record run

Gold has outperformed core equity benchmarks since 2000 and provides diversification benefits as an asset class uncorrelated to stocks and bonds. On October 7, 2025, spot gold surpassed $4,000 per ounce for the first time, cementing its status as a top-performing asset class. 

As of 11-November-2025; Source: Bloomberg

As seen in the graphic below from the World Gold Council, inflation, geopolitical risk assumptions, currency, interest rates, and price momentum have been key factors driving gold prices higher.  

Data as of 30-September-2025; Source: Bloomberg, World Gold Council

Central banks are holding gold as currency hedge

Central banks, especially in emerging markets, are increasing their gold purchases to reduce their dependence on the U.S. dollar and hedge against currency depreciation. 

For the first time since 1996, foreign central banks hold more gold than treasuries. 

Data as of 27-August-2025; Source: Bloomberg; Crescat Capital; Tavi Costa. 

Gold ETF inflows signal rising investor demand

Global physical-backed gold ETFs have experienced the strongest flows since the pandemic year of 2020. YTD through October 2025, $72 billion has flowed into physical gold ETFs, corresponding with the rise in gold prices. But most investors still remain underallocated to gold in their portfolios. Advice varies on how much investors should be allocating to gold. On the high end, Bridgewater’s Ray Dalio recommends as much as a 15% allocation to gold. Morgan Stanley favors a 60-20-20 model of equities, bonds, and gold. World Gold Council research excerpted below demonstrates that allocations between 4% and 15% in gold historically have improved risk-adjusted returns thanks to its low correlation with other asset classes.

Optimal gold allocation in a stock/bond portfolio, 1970-2024

Source: Robert J. Shiller; Reuters Elkon; Incrementum AG

Gold miners a leveraged play on gold

Gold mining companies are often considered a “leveraged play” on gold prices, benefiting from fixed all-in sustaining costs (AISC) regardless of supply and demand.  AISC covers a wide range of costs, including: 

  • Exploration and study costs (sustaining): Expenditures necessary to sustain current operations, not for expansion.

  • Direct production costs: Labour, energy, consumables, and royalties.

  • Sustaining capital expenditures: Investments required to maintain production levels, such as equipment replacements and mine development

  • Administrative costs: Corporate overheads related to running the business.

  • Environmental and closure costs: Reclamation and mine closure provisions.

This “operating leverage” can result in profit margin expansion when gold prices rise. These elevated profit margins also translate into improved financial health, allowing miners to pay down debt, strengthen their balance sheets, or initiate or increase dividend payments to shareholders. 

Learning from past boom and bust cycles, gold mining companies have made a strategic shift from chasing production growth to prioritizing financial value, including reducing debt, returning cash to shareholders, and maximizing shareholder value. Thanks to rising prices, cash flow generation is at record levels, coupled with strong earnings and reasonable valuations. YTD gold mining stocks have outperformed spot gold by a wide margin, given the favorable economics. Investors are seizing this opportunity, with inflows of $5.4 billion in Q3 2025, the largest quarterly inflow into gold mining funds since December 2009. 

Gold miners outpacing physical gold YTD

As of 31-October-2025, using NYSE ARCA Gold Miners; Source: Bloomberg

Our index approach 

The VettaFi Gold Miners Screened Index (VGOLD30E) tracks the market performance of the largest 30 gold mining and royalty companies, including a position in The Royal Mint Responsibly Sourced Physical Gold ETC. Additionally, a negative screen is utilized to exclude companies with exposure to controversial and lethal weapons, thermal coal, and greater than 5% exposure to fossil fuels.

Universe:

CE Sub-Industry of Gold with an allocation to The Royal Mint Responsibly Sourced Physical Gold ETC. 

Constituent Selection:

  • Minimum Size: Minimum market capitalization of 300 million USD, or 240 million USD for current constituents. 

  • Minimum Free-float: Securities with free float of less than 20% are excluded.

  • Minimum Liquidity: Average daily traded value (ADTV) over the last three months of 3 million USD, or 2.4 million USD for current constituents.

  • Maximum # Names: 30 Constituents plus the ETC.

  • Minimum 3-month trading days: 22

  • Rebalanced Quarterly (Jan, Apr, Jul, Oct): Constituents are modified free-float market cap weighted at the time of rebalance.

Screening considerations:

ESG/Human Rights Filter: Constituent business operations must comply with United Nation Global Compact (UNGC) principles and the Organization for Economic Cooperation (OECD) Guidelines for Multinational Enterprises. Companies involved in the production, development, or maintenance of anti-personnel mines, biological or chemical weapons, cluster munitions or depleted uranium are excluded from consideration for the index. Additionally, companies must derive less than 5% of their revenue from fossil fuels, as well and not derive any revenue from the exploration, mining, or refining of thermal coal.  

Categorized as an Article 8 fund under the EU Sustainable Finance Disclosure Regulation (SFDR). 

Weighting:

Free float market capitalization weighted with equity component weights capped at 10% and the Royal Mint Responsibly Sourced Physical Gold ETC position set to 5% of the index.

Rebalancing:

Quarterly: March, June, September, December.

Royal Mint responsibly sourced physical gold (RMAU): 5% allocation

  • Responsibly sourced: All gold bars are certified to meet the LBMA's responsible sourcing guidelines, which have been in place since 2019.

  • Recycled gold: Over half of the gold backing the ETC is from 100% recycled sources, including surplus gold from The Royal Mint's own manufacturing processes.

  • Lower carbon footprint: Recycled gold is significantly less carbon-intensive than newly mined gold, making RMAU a more sustainable investment option.

  • Physical backing: The ETC is physically backed by gold bars, which are custodied at The Royal Mint's vault in Llantrisant, Wales, offering investors a direct link to physical gold.

  • Transparency and assurance: The ETC is independently audited to ensure compliance with its strict standards, providing an extra level of assurance for investors.

For more information about the VettaFi Gold Miners Screened Index, click here. To capture this opportunity in an investable product, the index has been licensed in Europe by HANetf as the Gold Miners Screened UCITS ETF (ESGO). 

 

Evan Harp sat down with Ozzie Solares, Global Head of Media and Analytics at J.P. Morgan Asset & Wealth Management, to talk about attribution.

Evan Harp: Attribution is critical for measuring success as it can tell the story of how media or marketing spend can directly affect sales. Do you feel that asset manager firms, by and large, are good at attribution measurement?

Ozzie Solares: I will say, based on my experiences, that attribution is a challenging space for the industry. Asset managers want the confidence to link media spend directly to sales, but the reality of the tech and data landscape and what's actually possible presents significant hurdles. Every solution requires some level of compromise and by definition that means accepting something less than perfect. Marketers need to have a clear understanding of what their organization’s needs are to know where and what to compromise. 

How asset managers should think about attribution

Harp: What are the problems attribution solves?

Solares:  Ultimately, the problem attribution solves is an understanding of the client or audience journey and how those touchpoints influence revenue. As marketers we use that information to make decisions and to justify marketing investment. Attaching ourselves to driving real, measurable revenue makes for an easier narrative in C-suite forums.

Without it, decision making, marketing or finance-related becomes too subjective. Our challenge as marketers is driving the best possible outcome within a set of constraints. Budgets are one of the biggest constraints we as marketers contend with. The second, is an appreciation for what marketing delivers as a compliment to sales (especially in sales-led organizations).

When you start to delve into those details, you realize that while the technology landscape isn't always doing us any favors and continues to evolve, staying on top of attribution is key to successful revenue generation and efficient spending.

Harp: Attribution is about data, and something like 80% of the data we use today wasn’t available even a few years ago. I would think that more data would make attribution easier, but it looks like it doesn’t translate when it comes to marketing attribution.

Solares: More data doesn't necessarily mean easier attribution, I actually think it has created a different issue which is the ability for our organizations to deal with the onslaught of this new data. Ironically, even though the ability to track user behaviors has gotten better, data privacy laws have become more stringent and that limits the ability to even collect it. Walled-gardens like Amazon, Meta, or Google only further complicate things. That is forcing us to evolve toward new measurement solutions that rely more heavily on aggregated data, but again , there are trade-offs. The good news is that with so much money on the line for advertisers of all kinds, there no shortage of vendors trying solve and fill this gap.  

In the end, it's not about gathering all the data; it's about identifying the right data to solve a specific business problem first and then building a data model that compliments that need. 

Customer journey

Harp: Let's talk a little bit through the customer journey. There are many types of attribution methods, between last touch and multi-touch. Can you talk about when to use a specific attribution approach?

Solares:  Yeah. I think it's important to note that, it's probably not an either-or conversation. As you mature, you're going to find yourself using a combination of models. It's really important to understand what questions you're specifically trying to answer because each one of those models lends itself to a different use case, and potentially a different opportunity for you as a marketer. Generally speaking I recommend using market mix models (MMM) to guide investment allocations across channels and to measure ROI, while leaning on MTA solutions to understand the customer journey (and the friction points therein) to improve your ROI. Last touch isn’t bad so long as you understand what it does and doesn’t tell you, it’s probably best used when optimizing within channels versus across channels. 

Harp: You’ve also had experience working with marketing mix models - how is that similar or different from an attribution model?

Solares: First off, they are both attribution models. MMM relies on the use of aggregated metrics in some kind of time-series. The advantages it provides is that it doesn’t rely on PII, it can account for 3rd party variables (like market conditions), and it accounts for the halo effects that direct attribution simply can’t. With multi-touch attribution, what you're usually trying to figure out is the fractional value of an individual touch point through direct attribution. DOne correctly it explains the sequence of customer interactions and the fractional value of each step in that journey. The challenge with MTA models is that you need proper data collection on both impression and post-click side. This is where data collection and data privacy laws have the biggest negative impact. This is also what separates good MTA solutions from bad ones. If they can’t account for offline interactions or limit data collection to owned-channels, look elsewhere because you aren’t getting an accurate picture.

Harp: Is it common for companies to use MTA and MMM in tandem, or do they tend to use just one or the other?

Solares: I can't speak about common, but I can tell you, from my experience on the media agency side serving multiple clients that there is value in having both available is ideal. If I did have to choose, I would go with MMM. Ironically, I was having a conversation with someone at a very prominent social media platform recently and they mentioned that they have pivoted to MMM more and more. When you consider how much data this platform collects and has access to, that says a lot.

Getting stakeholders on the same page about attribution

Harp: How do you get everyone in an organization onboard? Where do you start? How can you navigate these leadership conversations across an organization? 

Solares: As marketers, we all know that we have to get in the minds of our audiences to make an impact. 

When engaging with sales, they're self-interested in the sense that they want to be able to drive revenue because usually they're compensated based on that. But the key to delivering your narrative is remembering that marketing is a partner to sales. When you're talking about things like ROI or contribution, just remember that. Because it can result in sometimes a defensive reaction if you suggest that marketing alone is the one driving revenue. Best to keep that in mind as you bundle your narrative to them.

I think, on the CEO and leadership side, at the end of the day, they want what's best for the business. And the decisions they're trying to make are, if I give you resources, it means I can't give somebody else resources. So they're trying to decide “where am I going to get the most bang for my buck or where am I going to get the best return within a certain timeframe?” 

For the CFOs particularly, by nature, they're more analytically inclined when it comes to investment decisions. When you start discussing ROI models, expect more detailed questions. They are the people who I have quite literally had to open up the hood and show them all my spreadsheets. They're asking about what coefficient I use, what's the statistical significance of that variable? What are all the components going into your models? It's all coming from a good place when we interact because I think they're genuinely interested - especially when you show them advertising and marketing is both an art and science. I think some of them don't always realize that at first. 

If you can feed into that curiosity by coming prepared to show them the details, I think you'll be better off.

Harp: Attribution models are rarely a “set it and forget it” type of thing. It seems they evolve with new data, business goals, and organizational demands. How do you manage that constant evaluation?

Solares: In my own experience, spending a lot of time on the foundation pays dividends down the road. It's probably not the sexiest part of the exercise, and at times it can feel laborious, but taking time to really set up your infrastructure based on the customer journey is critical. 

It’s important to be honest about where your data foundations are strong, what resources you actually have internally or externally, and your own comfort level with the subject matter. Approaching attribution with humility and realism sets you up to build practices that are not only credible, but able to evolve meaningfully over time.

Closing thoughts on attribution and telling your story accurately

Harp: Before we wrap this up, is there anything else people should know as they approach attribution?

Solares: It's a natural desire to have a one-size-fits-all approach. But it might not be possible. For example, when you look at financial data, that varies greatly from market to market. The US has certain laws around privacy and transparency, and the EU has different laws. Whether or not your business is B2B or B2C also changes the nature of what you need to measure and the time cycle you are looking at.

I talked about the importance of building a strong foundation before, and I want to underline that. The more you invest in having a solid foundation with alignment between departments on what data matters, the better you will be able to build your attribution model to tell your story accurately. 

 

Europe is undergoing an amazing industrial transformation with strategic plans for autonomy and self-sufficiency, aiming to reduce its dependency on non-European sources for critical areas such as:

  • Defense and security
  • Energy
  • Infrastructure
  • Supply chain 

Defense and security

Global instability and increasing geopolitical competitiveness have accelerated Europe’s plans for defense autonomy and readiness. One prime example is the ReArm Europe/Readiness 2030 Plan, detailed in the graphic below, which includes €800 billion in defence-related investment to boost European defense capabilities and industry by the end of the decade.

Components of the EU's "ReArm Europe" defence plan

The Russia-Ukraine War has been a wake-up call for Europe in terms of the need to invest more in defense equipment and modernization. The peace dividend era Europe enjoyed for so long has ended, and technology offers a more cost-effective path to achieving greater autonomy. 

Another key driver of the boom in European defense spending has been NATO’s increased target for military spending, rising from 2% of GDP to NATO’s newly established 5% of GDP goal. The 5% goal includes a 3.5% allocation to traditional military expenditures with a 1.5% provision for cyber, defence technology, and infrastructure investments. 

Source: ShareAmerica, US State Dept./H. Efrem

A key component of Europe’s plans is its European Defence Industrial Strategy (EDIS), focused on collaborative investment and coordination of defence capabilities, including initiatives like the Defence Industrial Preparedness Board and European Defence Projects of Common Interest.  The European Sky Shield Initiative is a perfect example of Europe’s new defense industrial strategy, as a collaborative effort to create a European missile defence system that will include a space shield, air shield, eastern flank watch, and drone wall. 

Energy security and independence

In addition to increased autonomy in defense, Europe is also pursuing a strategy for increased energy independence, reducing its reliance on Russia and boosting renewable energy and improved energy efficiency. REPower EU aims to make Europe independent from the import of Russian fossil fuels by the end of the decade. The European Commission has mobilized close to €300 billion to fund the REPower EU Plan. And earlier this year, Europe achieved an important strategic milestone with Baltic Energy Independence Day. Lithuania, Latvia, and Estonia have achieved full energy independence by building infrastructure like LNG terminals and synchronizing their energy systems with continental Europe, which has allowed them to cease trading with Russia and become energy independent as of February 8, 2025.  

Prior to the Russia-Ukraine conflict, European energy imports from Russia were at a high level. However, now Europe is actively transitioning to other sources of energy.  

  • Coal - All imports of Russian coal are banned by EU sanctions. 
  • Natural gas - All imports of Russian pipeline and liquid natural gas (LNG) will terminate by the end of 2027. 
  • Oil - Actions have been taken to address Russia's ‘shadow fleet’ (vessels employed by Russia to evade sanctions) transporting oil and stop Russian oil imports by the end of 2027. 
  • Nuclear - Europe has restricted the import of uranium, enriched uranium and other nuclear materials coming from Russia. And EU countries still using Russian-designed pressurized water reactors are working to replace Russian nuclear fuel with fuel from other producers.

European energy imports from Russia 

Source: European Commission

Closing the European infrastructure gap

European infrastructure investment is focused on closing a significant funding gap through a combination of public and private capital, prioritizing projects in sustainable transport, clean energy, and digital transformation. Europe has established several large-scale funding programs.

One of the largest programs is Germany’s government-approved €500 billion special fund, a 12-year plan to invest in infrastructure, climate protection, and modernization. Germany has extensive but aging infrastructure. This special fund is being deployed to improve railways, energy grids, and digital networks, alongside a focus on new technologies like hydrogen and geothermal energy. The plans are larger in scope than the Marshall Plan after World War II. Additionally, the historic levels of spending have required the relaxation of Germany’s constitutionally protected debt rules. 

Other infrastructure plans in Europe include:

NextGenerationEU - A €750 billion stimulus plan designed to support a sustainable and resilient post-pandemic recovery, with a significant portion dedicated to green and digital transitions.

InvestEU programme - This program aims to mobilize over €372 billion in public and private investment using an EU budget guarantee of €26.2 billion. 

Connecting Europe facility (CEF) - With a budget of over €33 billion, the CEF provides grants to co-fund TEN-T projects, with 60% of its budget allocated to sustainable infrastructure projects.

Cohesion policy funds - Funds aiming to reduce disparities between regions have financed nearly €300 billion of investments through grants in previous periods, supporting various infrastructure projects, especially in less developed regions of Europe.

Economic and supply chain resilience and re-industrialization

Europe is working to create a more resilient supply chain by increasing domestic capacity and reducing foreign dependence for key technologies and industries. Key efforts include:

  • Resilient EU2030 – Spain’s proposal, which provides a roadmap to reinforce Europe's strategic autonomy and global leadership in sectors such as energy, digital technologies, health, and food. 
  • European economic security strategy – Addresses risks related to critical technologies and their supply chain. The European Commission has proposed measures to safeguard research activities and make international partnerships more selective, prioritizing those that align with EU values.
  • Reshoring – “Smart reshoring" plans to redeploy industries to the EU, increase production and investment, and secure more strategic industries. Microsoft, Volvo, Sanofi, GSK, Novo Nordisk, Nestlé, Rheinmetall, and many others have announced significant investments in expanding production capacity in Europe for 2025.  Cheaper labour costs have favoured nearshore production in Eastern Europe.

Source: Statista, Poland Manufacturing, Hungary Manufacturing, IN Tech House

Our index approach 

The VettaFi Making Europe Great Again Index (VFMEGA) tracks the market performance of companies listed globally on recognized exchanges that provide exposure to European defence, energy, infrastructure, and nearshoring spending. Additionally, a negative screen is utilized to exclude companies with exposure to controversial weapons, thermal coal, or greater than 5% exposure to tobacco.

Universe:

The universe for the defence, energy, and infrastructure segments is defined as global equities headquartered and incorporated in European countries trading on major global exchanges. The following countries are eligible: Albania, Austria, Belgium, Bulgaria, Switzerland, Cyprus, Czech Republic, Germany, Denmark, Estonia, Spain, Finland, France, United Kingdom, Greece, Croatia, Hungary, Ireland, Iceland, Italy, Lithuania, Luxembourg, Latvia, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, Sweden, Slovenia, and Slovakia.

Nearshore Europe includes the following countries: Austria, Belgium, Switzerland, Cyprus, Czech Republic, Germany, Denmark, Estonia, Spain, Finland, France, United Kingdom, Ireland, Iceland, Italy, Lithuania, Luxembourg, Latvia, Netherlands, Norway, Portugal and Sweden. Benefiting countries include the following: Albania, Bulgaria, Croatia, Greece, Hungary, Montenegro, Poland, Romania, Slovakia, and Slovenia.

Constituent selection:

The top 10 companies per segment are selected based on a combined average rank of their full market capitalization rank and 3-month average daily trading value (ADTV) rank. To be eligible for inclusion, a company must meet a minimum thematic exposure to one of the specified sectors, with a special exception for companies in the nearshoring universe:

Minimum thematic exposure for defence, energy, and infrastructure segments must derive more than 50% of its revenue from one of the following segments:

Defence: Companies involved in the manufacturing and development of defence equipment (aerospace, military armoured vehicles & tanks, weapon systems and missiles, munitions and accessories, electronics & mission systems, and naval ships), or defence technology applications.

Energy: companies involved with exploration, extraction, refining, transportation, storage, distribution, or generation of energy.

Infrastructure: Companies involved with building, designing, owning, managing, or operating new or existing infrastructure.

All companies in the Nearshoring universe are eligible for inclusion.

ESG/Human rights filter: 

Constituent business operations must comply with the United Nations Global Compact (UNGC) principles and Organization for Economic Cooperation (OECD) Guidelines for Multinational Enterprises. Companies involved in the production, development, or maintenance of anti-personnel mines, biological or chemical weapons, cluster munitions, or depleted uranium are excluded from consideration for the index. Additionally, companies must derive less than 5% of their revenue from tobacco manufacturing, distribution, and the sale of tobacco products, as well as not derive any revenue from the exploration, mining, or refining of thermal coal.

Additional selection criteria:

  • Minimum size: Securities of companies with a market capitalization below $500 million USD are excluded.
  • Minimum free-float: Securities with a free-float of less than 20% are excluded.
  • Float market cap: $100 million USD.
  • Minimum liquidity: Securities with a 3-month ADTV below USD 1 million are excluded.
  • Maximum # names: 40 Constituents with a maximum of 10 Constituents per segment.
  • Minimum 3-month trading days: 22
  • Rebalanced quarterly: (Jan, Apr, Jul, Oct). Constituents are equal weighted at time of rebalance.

For more information about the VettaFi Making Europe Great Again Index (VFMEGA) click here. To capture this opportunity in an investable product, the index has been licensed in Europe by HANetf for a European UCITS ETF, the Making Europe Great Again ETF (GR8) .  A non-screened version has also been licensed for an exchange-traded product in the U.S., which is expected to launch in the coming year. 

Conference sponsorships are premier opportunities for asset managers to connect with financial advisors, build brand equity, introduce new products, and generate qualified sales opportunities over a condensed period.

To truly maximize returns on this significant investment, the era of relying on mere presence and proximity is over. The greatest conference outcomes now belong to those who apply data and precision across the entire sponsorship lifecycle: before, during, and after the event.

From host to partner in behavioral intelligence

At VettaFi, we don't just host the leading advisor-centric Exchange conference; we also engage with the financial advisor community every single day. We understand what advisors are researching, what content they are engaging with, and where their investment interests are trending.

This unique vantage point has informed the development of our proprietary Investor Behavioral Intelligence (IBI) Platform. 

For Exchange ‘26, we are providing exclusive access to the IBI platform for all our conference sponsors. This platform helps connect issuers to the advisor attendees that might be most interested in their offerings. It features:

  • Lead intelligence reports: On-demand reports that combine an advisor's digital and in-person engagement with behavioral intent signals, allowing for prioritized sales outreach.
  • Advisor traffic tracker: A powerful tool that de-anonymizes advisor traffic on a sponsor’s own website, building a comprehensive audience view and tying website behavior directly to Exchange sponsorship and VettaFi digital marketing campaigns.
  • Enhanced audience analytics: Multi-page pre- and post-conference reports outlining key demographic segments that a sponsor’s conference presence successfully reached.

"For too long, conference sponsorship has been about proximity, not precision,” said Craig Katz, Head of Behavioral Analytics at VettaFi. “By integrating our Investor Behavioral Intelligence platform, we are giving our sponsors an unprecedented advantage, powering superior prioritization of their most engaged leads.”

Your guide to data-driven sponsorship success

Access to these tools helps asset managers maximize ROI from their Exchange sponsorship. Here’s how you can leverage this intelligence across the entire event lifecycle.

1. Before: Precision targeting

The goal before the conference is to transform a static list of attendees into a prioritized ‘target list’ of high-intent leads. This ensures your team focuses its energy and resources on prospects most likely to convert.

  • Enablement: Lead Intelligence Reports (pre-conference list) provides a behavioral profile for each advisor.
  • Strategy: You can now qualify prospects based on demonstrated intent, such as recent research on specific asset classes or engagement with your digital content, rather than relying solely on their job title or firm size.

Action checklist (Before):

  • Tier your target list: Use the IBI data to create a segmented attendee list based on two key factors: engagement with your brand and their relevant product interest.
  • Focus outreach: Concentrate your pre-conference meeting requests, personalized emails, and initial outreach efforts exclusively on these high-value, high-intent prospects.

2. During: Strategic engagement

With the necessary data at your fingertips, your conversations move from generalized introductions to highly relevant, strategic discussions. This makes every minute of face time more productive.

  • Enablement: The Lead Intelligence dashboard provides real-time access to prospect profiles, allowing for instant preparation for pre-scheduled meetings and spontaneous on-site conversations.
  • Strategy: Knowing a prospect recently researched "ESG funds" or "Fixed Income ETFs," for example, allows your team to customize the pitch on the spot and quickly match the advisor's known interest with the appropriate product specialist on your team.

"The result will be more effective, data-driven conversations on-site, dramatically increasing the quality of interactions with high-value leads." - Craig Katz, Head of Behavioral Analytics at VettaFi

Action checklist (During):

  • Custom pitches: Develop and prepare custom agendas and pitches for all pre-scheduled meetings based on the advisor's known interests.
  • On-the-fly intel: Equip your team with tablets or iPads to access the Lead Intelligence dashboard for conversations that happen on the fly, ensuring every spontaneous interaction is informed and strategic.

3. After: Measurable conversion

Post-event data allows you to streamline the path to conversion and prove quantifiable ROI. The sponsorship is now an integrated, measurable step in your broader lead nurturing cycle.

  • Enablement: Advisor Traffic Tracker (ATT) helps you tie Exchange engagement (e.g., badge scans, session attendance) back to activity on your own website, providing a full-funnel view.
  • Enablement: Enhanced Audience Analytics (EAA) is your ROI enablement tool, providing robust reporting to support internal conversations about who you reached, what they cared about, and ultimately, to demonstrate the value of your event investment.

Action checklist (After):

  • Strategic follow-up: Use the combined data (onsite interaction + web behavior) to segment and prioritize post-event outreach. For example, a lead that engaged with your onsite activation and visited your fund page post-event is immediately flagged as a high-priority, warm lead.
  • Report back to leadership: Leverage these advanced analytics to share a clear, data-driven report of your success, justifying the investment and informing future sponsorship decisions.

Conclusion

Knowing who is on an attendee list is good. Knowing what articles they’ve been reading, what sessions they attend, and which asset classes they are most interested in is better.

The issuers who achieve the most success are those using precision data to plan well in advance, resulting in strategic conversations during the event and streamlined follow-up after the event.

To secure your competitive advantage and maximize the value of the Investor Behavioral Intelligence Platform, the time to act is now. Sponsoring early gives your team the critical lead time needed to analyze attendee data and build a truly maximized strategy.

Interested in learning more about how you can access the IBI platform and secure your head start for Exchange ‘26? Speak to our team.

Different ETF wrappers can have different impacts on intraday liquidity, transparency, expense ratios, and tax efficiencies. That’s why it’s essential for asset managers launching an ETF to choose a wrapper that actually aligns with their investment strategy. 

The better aligned your wrapper, the better your operational workflow and competitive positioning. Use our guide to ETF wrappers below to learn how to evaluate them and choose the right one.

Types of ETF wrappers

Different exchange-traded fund (ETF) wrappers offer different fund structures. Each type has distinct implications for how much your fund costs, operates, and serves investors.

What is an ETF wrapper?

An ETF wrapper, also known as an ETF structure, is the structure that determines how an ETF operates, manages holdings, and delivers returns. The wrapper determines cost profile, tax efficiency, and liquidity characteristics. 

Wrappers cover a number of facets about how an ETF functions:

  • Investment management approaches: Is the fund passive or active? 
  • Replication methods: Does the fund contain physical holdings or derivatives, or is it a hybrid?
  • Transparency levels: Does it report its holdings disclosures daily or quarterly?
  • Operational framework: How does the fund handle creation and redemption? How about portfolio management or market making?

The two main types of fund structures are passive and active. Both allow for real-time ETF trades throughout the trading day and offer many of the same benefits for individual investors. They only differ in terms of the issuers or financial professionals who manage the fund.

Passive ETF wrappers

Passive ETF wrappers track a specific benchmark index with minimal deviation. They have dominated the ETF market for decades due to simplicity and cost effectiveness.

Advantages

  • Lower costs and lower expense ratios than active ETFs. A lower-cost product may have an edge in gaining purchase with investors.
  • Automatically tracks an index. Passive ETFs look to replicate the performance of a specific benchmark index. This requires less human interaction.
  • Lower portfolio turnover. Because active managers will tend to make more frequent trades, passive ETFs typically have less portfolio turnover. This means greater tax efficiency and fewer trading fees.

Disadvantages

  • Less flexibility than active ETFs. Sudden shifts in the market can often create unique opportunities and challenges. A passive fund will be less likely to have the flexibility to fully capitalize on opportunities or react in real time to market events.
  • Can’t outperform the market. By definition, a passive ETF seeks to replicate the performance of a particular slice of the market. 

Active ETF wrappers

Active ETF wrappers give portfolio managers the ability to make investment decisions based on research and market conditions. Due to regulatory changes that have made active management more viable, active ETF wrappers have grown.

Advantages

  • More flexible than passive ETFs. Because they are actively managed, active ETFs have more flexibility to react to market volatility and capture opportunities or pivot out of holdings that might be facing unexpected headwinds.
  • Can generate higher/better results than the market. While a passive fund seeks to replicate the performance of a specific index, an active fund looks to outperform benchmarks. There is a potential for an active ETF to outperform. However, note that past performance does not guarantee future performance.
  • Allow asset managers the opportunity to better mitigate risk. Because the active ETF wrapper can pivot more easily, it gives portfolio managers more options when it comes to risk mitigation.
  • Less rebalancing by portfolio managers. Indexes need to rebalance in order to reduce tracking error and accurately capture the slice of the market they seek to capture. Passive ETFs, as a result, will have to rebalance to stay in line with their benchmark index every time the index rebalances. Active ETFs are less beholden to that.

Disadvantages

  • Less transparency regarding holdings. Many investors like to know what they own, and active products tend to have less transparency than their passive counterparts.
  • More frequent trading leads to higher costs. Active funds tend to trade more, meaning more taxes and associated fees. This means less tax efficiency for investors and often higher costs in the form of expense ratios.

Deciding which to choose comes down to your investment objectives, trading strategy, investment goals, and the types of investors you want to attract. 

For example, are you creating a tax-efficient product? Passive might be a better structure. If you’re looking to create a product that can adapt to volatility on the fly, an active product might be better suited to the task.

Physical, synthetic, and hybrid ETFs

In addition to choosing between active or passive management, asset managers must decide which securities their product will hold. 

  1. Physical ETFs hold actual securities in an underlying index.
  2. Synthetic ETFs hold financial instruments like derivatives instead of actual securities.
  3. Hybrid ETFs contain a combination of physical and synthetic holdings.

Which one you choose will affect the complexity of your operations, the accuracy of tracking, counterparty risk, and investor perception.

How to choose an ETF wrapper

Bringing a new product into the ETF market means structuring it to appeal to investors. You’ll need to consider several aspects of your business operations and goals to determine the ideal ETF wrapper for your product. 

Your management style

Deciding between a passive or active structure depends on your daily operational capacity:

  • Actively managed exchange-traded funds require more day-to-day interaction
  • Passive structures need less hands-on management

Also, consider your team:

  • Do you have portfolio managers with proven active management track records?
  • Do you have research infrastructure for active decisions?

Smaller firms may benefit from starting with passive structures to build operational capabilities.

Operational costs and complexities

Assess your resources as an ETF issuer. Can you handle the creation and redemption processes? Can you ensure accurate market pricing?

Converting mutual funds or separately managed accounts has its advantages, such as a performance track record and existing investors. However, it faces greater regulatory hurdles and potential tax consequences.

Active strategies typically require more sophisticated technology, so don’t forget to budget for technology infrastructure: 

  • Portfolio management
  • Compliance monitoring
  • NAV calculation
  • Regulatory reporting systems

Level of transparency

Choose your transparency model based on strategy protection and investor preferences.

  • Fully transparent: A passive index-tracking ETF wrapper is the most common type of fully transparent product. It requires daily public disclosures of all holdings.
  • Semi-transparent: Active ETF managers can opt for a semi-transparent wrapper and will only have to disclose holdings quarterly rather than daily.

Your target investors

Build your product with a specific end investor in mind. For example:

  • Institutional investors understand complex derivative structures
  • Retail investors prefer straightforward products
  • RIAs prioritize transparency and low costs
  • Hedge funds and family offices may accept semi-transparent active strategies

If you’re working with financial advisors, they typically evaluate ETFs based on:

  • Daily liquidity
  • Tight bid-ask spreads
  • Clear benchmark comparisons

You’ll also want to consider investment size requirements, taxable versus tax-deferred accounts, and lump sum versus dollar-cost averaging patterns.

Your tax strategy

Consider tax implications for your target investors.

ETF tax advantages

ETFs generally offer tax benefits over mutual funds through in-kind transfers that minimize capital gains distributions. However, tax efficiency varies:

  • Passive ETFs generate fewer capital gains (lower turnover)
  • Physical ETFs have different tax characteristics than synthetic ETFs

Optimizing for taxable accounts

If targeting taxable accounts, consider:

  • Tax-loss harvesting techniques
  • Holding period management
  • International withholding tax implications
  • Treaty benefit optimization for foreign securities

Your underlying securities

The underlying securities within your ETF often drive structure decisions. Different asset classes benefit from different approaches.

Equity ETFs

  • Liquid large-cap: Physical replication works well.
  • Small-cap or international: Sampling or hybrid approaches reduce costs.

Fixed-income ETFs

Bonds present unique challenges due to over-the-counter trading, market fragmentation, and interest rate sensitivity. Many use sampling methodologies or custom baskets. Active management is particularly valuable for security selection and duration management.

Alternative asset classes

  • Commodities: Often require synthetic structures or specialized approaches.
  • Currencies: Typically use derivatives.
  • Real estate: May hold REITs or use futures.

The liquidity of your ETF shares and the nature of your assets under management can help you determine if you should opt for a fully transparent or semi-transparent wrapper. For this reason, always match your structure to securities liquidity. 

Highly liquid securities support full transparency and efficient arbitrage. Less liquid securities may require semi-transparent structures to protect against predatory trading.

You might like: Best practices for launching an ETF

Regulatory implications of ETF wrappers

Regulatory requirements vary significantly between fully transparent and semi-transparent structures, affecting timeline, costs, and ongoing compliance.

Fully Transparent ETFs

Fully transparent ETFs follow the SEC's Rule 6c-11, providing a streamlined approval process.

Requirements

  • Daily disclosure of full holdings and assets under management (AUM)
  • Disclosure of premiums and discounts vs. net asset value (NAV)
  • Enable arbitrage for price stability and liquidity
  • Flexibility to use custom baskets

Advantages

  • Faster time to market
  • Lower legal costs than exemptive orders
  • Standardized approach
  • Ideal for first-time ETF issuers

Semi-Transparent ETFs

Semi-transparent ETFs require an exemptive order from the Securities and Exchange Commission, which is a more complex and costly process.

Differences

  • Quarterly holdings reporting (vs. daily)
  • Choose a proxy portfolio or a confidential basket strategy
  • More complex operational and compliance requirements
  • May require publishing a tracking basket on your website

Disclosure obligations

  • Prospectus must include premium/discount information
  • Website must publish bid-ask spread and NAV premium/discount data
  • Annual shareholder report requires enhanced disclosures

Timeline and costs

  • Exemptive order process: 6-12+ months
  • Significant legal fees
  • Worth considering only if the strategy genuinely benefits from confidentiality

Learn more: The asset manager’s guide to SEC Rule 6c-11 compliance

How to find the right ETF wrapper for your goals

Every ETF structure has its use case. By understanding your end investor, your strategy, and your capacity as an asset manager, you can determine the most appropriate ETF wrapper for your fund. 

Whatever investment decisions your end investor might be seeking, whether it is portfolio diversification or exposure to a specific asset class, that can help drive how you set up an investment vehicle. Think about your management style and your firm’s strengths and weaknesses as you determine the right product structure.

No matter what kind of product you’re building, having the right index partner can make a huge difference. VettaFi’s award-winning index factory can help you build the product you want in the ETF wrapper that makes the most sense for you.

Up next: 7 tips for cost-efficient ETF operations

 

Most open-end ETFs now operate under SEC Rule 6c-11, which eliminated the need for individual exemptive relief but introduced daily disclosure requirements. Many asset managers find these requirements operationally challenging.

From website transparency rules to custom basket policies and six-year recordkeeping mandates, staying compliant comes down to using systematic processes. This guide walks you through qualification criteria, compliance requirements, and practical implementation strategies for operating ETFs under SEC Rule 6c-11.

What is rule 6c-11?

The SEC adopted Rule 6c-11 on September 25, 2019, with an effective date of December 23, 2019. 

The rule leveled the playing field by eliminating the costly, time-consuming exemptive relief process for most ETFs, standardizing and streamlining ETF operations. It  allows most open-ended, fully transparent exchange-traded funds to sell and trade shares without each issuer having to get an individual ETF exemptive order from the SEC. 

In order to operate your ETF under this rule, the Securities and Exchange Commission requires you to be in compliance.

Does your ETF qualify for rule 6c-11?

Not all ETFs can operate under Rule 6c-11. The rule applies exclusively to open-end, fully transparent ETFs, which means your fund must disclose its portfolio holdings every day.

If your ETF meets these criteria, you can operate without seeking individual exemptive relief from the SEC. However, you must maintain strict compliance with the rule’s requirements.

Rule 6c-11 applies to most open-end funds. These include:

  • Index-based ETFs
  • Self-indexed ETFs
  • Actively managed, fully transparent ETFs

The rule does not benefit or include:

  • Unit investment trusts (UITs)
  • Leveraged and inverse ETFs
  • Non-transparent or semi-transparent ETFs
  • ETFs structured as a share class of a multi-class fund

Additionally, fund-of-funds ETFs and master-feeder structures may face additional compliance considerations under Rule 6c-11, depending on their ability to meet daily transparency requirements.

Action items

Here are the specific steps you can take right now to address these compliance requirements.

  1. Determine if your ETF qualifies for Rule 6c-11. If it is open end and fully transparent, it should qualify.
  2. If your ETF is non-transparent or leveraged/inverse, identify the need for exemptive relief. Exemptive reliefs are legal exemptions granted by the Securities and Exchange Commission that allow a fund to operate outside of the normal rules of the Investment Company Act of 1940. This will be necessary for certain fund structures.
  3. Review the fund structure against Rule 6c-11 exclusions. UITs, levered and inverse ETFs, and non-transparent ETFs, etc.
  4. Document your ETF’s qualification status for compliance records. Record keeping and documentation are critical.

You might like: Best practices for launching an ETF

How to stay compliant

Rule 6c-11 compliance has three pillars: daily website transparency, written policies for custom baskets, and thorough recordkeeping and reporting.

Website disclosures

Your ETF must post complete portfolio holdings on its website before the market opens each trading day. Website disclosure is a non-negotiable ETF portfolio transparency requirement, forming the foundation of 6c-11 compliance.

Required daily disclosures:

  • Ticker symbol
  • CUSIP and other identifiers
  • Description of each holding
  • Quantity of each security or asset held
  • Percentage weight of each holding in the portfolio
  • Net Asset Value (NAV) of the fund
  • Market price, premium, and discount
  • Median bid-ask spread
  • One-year historical data on premiums and discounts

Custom basket policies and procedures

Custom baskets allow authorized participants (APs) — market makers who create and redeem ETF shares — to use non-standard securities during the creation/redemption process. This flexibility can benefit your ETF but also requires strict governance.

Your ETFs are also required to maintain written policies that detail the parameters for the construction of creation units and redemption baskets. These policies should include:

  1. Construction and acceptance parameters. These parameters must be in the best interest of the ETF and its shareholders.
  2. Amendment procedures. A detailed, documented process for making changes to the above-mentioned parameters.
  3. Review responsibilities. Names and titles of everyone authorized to review and approve custom basket parameters.

Recordkeeping for authorized participant transactions

In addition to policies, you must also keep detailed records of all AP interactions. 

This includes storing written agreements with each authorized participant and documentation of every basket exchanged, including the quantity and percentage weight of each holding in those baskets.

These records must be retained for at least six years, with the first two years in an easily accessible location. 

Action items

  1. Audit the ETF’s current website. Ensure that all required disclosure fields are present and updated correctly before market open.
  2. Create a daily disclosures checklist. This should include assigned responsibilities and backup coverage for your operations team.
  3. Draft or update written custom basket policies and procedures. Include clear criteria for what constitutes “best interest” decisions.
  4. Identify personnel responsible for custom basket reviews. Make sure you hang on to all data and records regarding the assigned personnel.
  5. Set up a recordkeeping system for AP agreements and basket transaction data. Include proper retention timelines and access protocols.

Disclosure formatting and special requirements 

Rule 6c-11 mandates specific formats for certain disclosures and triggers additional reporting when market conditions create significant premiums or discounts.

Premium and discount reporting format

Every day the market is open, an ETF needs to disclose certain information on its website. 

Your website must display premiums and discounts using both a table and a line graph. These visualizations must cover:

  • The most recent complete calendar year
  • All calendar quarters of the current year

The above metrics show how your ETF’s secondary market price relates to its NAV.

Triggered disclosure requirements

Be aware that if the premium or discount exceeds 2% for more than seven consecutive trading days in a row, you are required to disclose that information and reveal the factors that contributed to it.

This means immediately disclosing:

  • That the threshold has been breached
  • The specific factors that contributed to the deviation
  • Any steps being taken to address the situation

Triggered disclosures are separate from your daily reporting and require specific attention from your compliance team. Missing this requirement is a common compliance violation.

Median bid-ask spread calculation

To remain compliant, make sure you are displaying a median bid-ask spread calculated over the past 30 calendar days.

This metric helps investors understand trading costs and must be updated continuously as new trading days occur.

Internal documentation requirements

Although disclosures are public-facing, you must also maintain internal documentation of your:

  • Basket-construction methodology
  • Custom basket acceptance processes
  • Representative sampling techniques, if applicable
  • Compliance testing procedures
  • Control mechanisms to prevent unauthorized basket modifications

Remember, non-transparent ETFs that don’t meet 6c-11 conditions need to apply for exemptive relief from the SEC. This means filing a proposed rule change asking the SEC to amend its own rules.

Action items

  1. Review disclosure formatting. Verify your website displays premiums and discounts in both table and line graph format, covering the required timeframes.
  2. Implement monitoring system for 2% premium/discount threshold. Remember, seven consecutive trading days at over 2% requires further compliance procedures.
  3. Calculate and post median bid-ask spreads for the past 30 days. The last 30 calendar days must be displayed.
  4. Create a master document for your basket construction methodology. Make sure you are disclosing all aspects of the methodology, including decision trees for accepting or rejecting custom baskets.
  5. Arrange a compliance testing schedule for all procedures. This should be at least quarterly, and document all controls you have in place.

Staying compliant: daily and long-term reporting requirements under SEC rule 6c-11

Rule 6c-11 is a daily reporting commitment, so you need consistent workflows, backup systems, and long-term data retention practices to avoid non-compliance. Missing even a single day of required disclosures will put your ETF out of compliance.

Daily pre-market requirements

Portfolio holdings must be posted prior to the opening of each business day. Before the market opens, your operations team must:

  • Update and publish complete portfolio holdings
  • Calculate and post current NAV, market price, and premium/discount data
  • Update the rolling 30-day median bid-ask spread
  • Verify all disclosure formatting remains correct

Accessibility and retention standards

Your ETF’s website must make all disclosures freely and readily available, without requiring login credentials, subscriptions, or registration.

Investors should be able to find this information intuitively, typically through a dedicated “regulatory information” or “daily holdings” page.

Recordkeeping timeline:

  • Minimum retention: All reports and records must be retained for at least six (6) years from the end of the fiscal year in which the transaction occurred.
  • Easily accessible: The most recent two (2) years must be immediately retrievable, not in archived storage. Years two through six can be stored in less accessible archive systems but must be retrievable upon request.
  • Scope: Includes all daily disclosures, AP agreements, custom basket transactions, and internal policy documentation.

Building resilient processes

Single points of failure create compliance risk. Your reporting can’t stop because one person is sick or systems go down during critical hours. Build redundancy into every step of your compliance workflow.

Action items

  1. Map your complete daily reporting workflow with specific timing requirements (e.g., “update website by 9:00 a.m. ET”) and assign primary and backup personnel to each task.
  2. Implement a six-year retention system with automated alerts before records age out. Ensure two-year-old records transfer to longer-term storage on schedule.
  3. Verify automated alert systems notify compliance officers when premiums or discounts reach 1.5% for multiple days. This gives advance warning before the 2% threshold triggers additional disclosure.
  4. Create a responsibility matrix that assigns specific team members to daily tasks, periodic disclosures (triggered by the 2% threshold), and annual filings (Form N-CEN).
  5. Document and test backup procedures quarterly, including scenarios for system failures, staff absences, and market holidays.

Common compliance challenges with rule 6c-11

Rule 6c-11 compliance creates ongoing operational burdens that many asset managers underestimate during the planning phase. Understanding these challenges upfront helps you budget appropriately and build resilient processes.

Daily pressure

The pre-market disclosure deadline creates unforgiving time pressure. Your team must calculate, verify, and publish all required data before the market opens every trading day. There’s no grace period for system failures, staff absences, or data quality issues. You’ll need dedicated personnel, strong backup systems, and straightforward escalation procedures for when things go wrong.

Technology and infrastructure investments

Manual compliance processes don’t scale. Most asset managers invest in automation tools for:

  • Portfolio data aggregation and validation
  • NAV calculation and verification
  • Website publishing systems with version control
  • Premium/discount monitoring and alerting
  • Recordkeeping with proper retention guidelines

Typically, these systems incur upfront implementation costs in addition to ongoing maintenance, licensing fees, and regular upgrades. 

Staffing and expertise requirements

6c-11 compliance isn’t something you can “set it and forget.” Your staff must understand:

  • ETF market mechanics and authorized participant relationships
  • Custom basket construction parameters and best-interest standards
  • Data integrity verification procedures
  • SEC examination protocols and documentation requirements

Many asset managers designate a dedicated compliance officer or operations specialist to own daily reporting, with additional backup coverage to ensure continuity.

Market volatility

When markets are stressed, premiums and discounts tend to swing. The seven-day/2% threshold for triggered disclosures often catches asset managers off guard because it requires active monitoring, you must explain the factors (not just the numbers) behind the deviation, and the disclosure must occur promptly once the threshold is breached.

Building monitoring systems that alert you at 1.5% or earlier gives your compliance team time to prepare appropriate disclosures before the requirement triggers.

Consequences of non-compliance

Knowing the requirements is important for compliance, but you should also be aware of the consequences of failing to comply. Non-compliance can result in:

  • SEC deficiency letters requiring remediation plans
  • Enforcement actions and potential fines
  • Operational disruptions if the SEC suspends your ability to operate under 6c-11
  • Reputational damage with authorized participants and investors
  • Potential requirement to seek exemptive relief (a lengthy, expensive process)

The SEC actively examines ETF compliance during routine inspections, so consistent adherence is key.

Action items

  1. Calculate your total annual compliance budget. Include technology licensing, staffing, data feeds, and backup systems, as well as cybersecurity and disaster recovery.
  2. Conduct a gap analysis of your current technology stack. Can your systems reliably publish data before market open? Do you have automated alerts? Can you recreate historical calculations for SEC examination?
  3. Create a detailed process map. Show every step from data collection to website publication, identifying single points of failure and building redundancy into critical steps.
  4. Establish a premium/discount monitoring protocol. Include automated alerts at 1.5% (advance warning) and 1.8% (preparation mode) so you're never caught off guard by the 2% threshold.
  5. Run a compliance cost-benefit analysis. Compare the investment in automation and staffing against the operational risk and potential enforcement costs of manual processes or non-compliance.

Learn more: What asset managers should know about ETF liquidity in 2025

How to maintain regulatory adherence to rule 6c-11

Staying in compliance could seem an overwhelming task, which is why it’s essential to have a constant monitoring procedure for your compliance processes, reports, and records. You’ll also need to stay abreast of any new rules, as well as changes made to ETF rules.

Establish regular compliance reviews

Schedule internal audits before the SEC does. Quarterly reviews should check website disclosure accuracy, custom basket transactions, and premium/discount breaches. Annual reviews should audit complete documentation, update policies, and assess technology performance.

Required SEC filings for ETFs

Beyond daily disclosures, ETFs must file the following.

Initial registration:

  • Form N-1A: All new ETFs must file form N-1A, the standard registration statement that includes the fund’s prospective.

  • Form N-8B-2 (UITs only): ETFs structured as UITs must file registration form N-8B-2 and continue to file annual updates.

Annual reporting:

Missing deadlines will trigger SEC inquiries and deficiency letters.

Stay current on regulatory changes

Monitor SEC proposed rules, no-action letters, and enforcement actions against other ETFs. Subscribe to SEC alerts at sec.gov/news/whatsnew/wn-rss and review industry association updates regularly.

Prepare for SEC examinations

When SEC examiners arrive, they request daily disclosure records, custom basket documentation, policies and procedures, and evidence of compliance testing. Maintain a centralized compliance file with organized, complete documentation to expedite examinations.

Designate ownership

Assign specific roles to your staff: chief compliance officer (overall program ownership), daily operations lead (pre-market disclosures), custom basket review authority, and recordkeeping administrator. Document all roles in writing with backup coverage.

Action items

  1. Create a compliance calendar with all recurring obligations. Include daily updates, quarterly reviews, annual Form N-CEN filing, and policy reviews.
  2. Subscribe to SEC regulatory alerts. Assign someone to review new releases monthly.
  3. File Form N-CEN. This form must be filed within 75 days of fiscal year-end using a pre-submission checklist to ensure completeness.
  4. Formally designate a chief compliance officer. This person should have documented authority, reporting lines, and sufficient resources to fulfill the role.

Rule 6c-11 compliance: final thoughts

Rule 6c-11 compliance comes down to having a detailed, ongoing plan with automation, reliable systems, and experienced personnel. These investments will quickly pay for themselves by reducing errors and making everyday operations a little smoother.

Authorized participants notice which sponsors have their act together. That means when market volatility and premiums swing, you’ll be glad you have systems that can handle it. Getting compliance right from the start is easier than fixing it.

VettaFi helps asset managers at every stage of the product life cycle. If you’re interested in developing an ETF, reach out to one of the experts from our index team now.

Up next: ETF vs mutual fund: 9 strategic considerations for asset managers

 

In this edition, VettaFi CMO Jon Fee sits down with Vanguard’s Sid Ratna. The role of the chief marketing officer (CMO) has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise, with responsibilities that span pipe, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product.

Sid Ratna is a ‘Full-stack’ CMO of $3 trillion intermediary business. He leads a talented, fully agile, diverse team of ~140 marketers responsible for E2E marketing strategy + execution. His work is in service of what he calls the 3 C’s: delight the Client, empower the Crew, and grow the Company.

Sid Ratna on Jobs and Careers

Jon Fee: What is the difference between a job and a career?

Sid Ratna: For me, a job is where someone else has told you to do something and drawn a box for you. They have defined what success is. You, in turn, have to fill up that box and operate within that box. For many of us, including myself, a job was really a way to pay bills and prevent my parents from having to subsidize my life.

A career is where you determine what success is. What you want your story, your narrative to be. You’re investing in yourself over decades. In your career you think about other people more. Your impact and value to them. What’s your purpose? In career you’re thinking bigger than yourself and and your paycheck. If you are doing it right you are thinking beyond your box, and hopefully spending as much time out of the box as you are inside it. And hopefully thinking a lot about whether your legacy persists in helping clients and crew long after your presence has moved on.

Fee: That’s an excellent answer. What was your first job?

Ratna: My first job — I really wanted to work in a bank, but I had graduated into a crisis. I had actually skipped my first year of college, I was doing sophomore year in Canada. I didn’t even grow up in Canada, I grew up in Thailand. I was just 17 years old and I didn’t really nail my first year of school with great GPA, great academics. So while I wanted to work in the bank, I wasn’t in that top 10%.

I actually got a job on the phones, reviewing loan applications and credit card applications, asking applicants deeply personal questions about their income and debt. It was formative. I learned a lot of gratitude for what it is to be on the front line, and got into strategy and analytics from there.

Living the Dream Job

Fee: The counterpoint question to that is what is your dream job?

Ratna: In many ways, I am living my dream job with Vanguard and what I do now. That might sound hokey, but it is actually just the way I approach the job, the mindset, and gratitude for all the things that I get to do.

Let’s, let’s put aside the word a job for a second and say, what are the dream things that you would like to be able to do, and get paid for it? For me, those elements are: be able to impact a large group of people — check. Build something that’s beautiful that’s born out of your vision and the team around you that you recruit and select — check. Do something delightful for the client or do something delightful for society and do it at a place that is mission-driven and purpose-driven. So, check, check, check, check!

But also work at a place where you never sacrifice personal integrity or compromise personal beliefs. I love being a family man, a husband and an involved father, and work lets me do that — check. Today, I feel like I am doing a ‘dream job’ because go to bed happy and feeling very fulfilled.

I probably have a ‘Chapter 2 Dream Job”. Once I’ve put my kids through college, I really, really would love to do something — I haven’t defined this yet –where I get to teach kids who haven’t had the same access to opportunities and networks that are essential in having the types of careers they aspire to and deserve.

There are a lot of things people take for granted: how to wear a tie, what suit to wear, how do you interview? How to shake hands? How do you write a resume? These are things some of the kids in America don’t have access to. I’ve had a great ride for 22 years, I’d love to just impart a lot of that back into maybe just looking for that access to information. I don’t know how that takes shape, but I would love to do that.

Fee: Awesome. That’s a that’s a great answer.

Ratna: In many ways it’s just paying it back or paying it forward. I’ve made so many unintentional blunders in my life, including showing up for my first real job interview wearing what, at that time, I thought was a really cool pink tie and a pink shirt, to a very conservative place. You have to understand it was ultra conservative. [Laughs] I just didn’t know that.

People along the way taught me the importance of first impressions. And, yes, you should always be creative and bring your authentic self to work, but that can take many different versions.

Ratna’s Unique Entrance Into the World of Marketing

Fee: So how did you get into the marketing world?

Ratna: I haven’t been a marketer for as long as people think. My career arc was almost always strategy, data, and business development. You can call it M&A, you can call it strategic partnerships.

I love growing businesses and I love using data and financial acumen to build something of beautiful value for the client and for the company. At that time, JP Morgan Asset Management was looking to do a data and digital transformation of marketing. I joined on their data side, and really wasn’t looking at marketing. I was just looking at data and effective use of digital assets and marketing investment to drive outcomes.

I just saw sales and marketing as channels around the client. So, I started just building a more client centric understanding of who, say, Jon Fee was, as an individual — not through the lens of marketing or a digital website or email. I didn’t really care. I just cared about Jon and what was Jon telling my company in regards to what he liked and didn’t like. And by virtue of that, when the US CMO left, the global CMO at the time offered me the opportunity.

So I became the CMO as well as head of analytics.

Learning From the Past

Fee: Excellent. It’s a great story. What’s something you learned from an earlier job that you had outside of marketing that impacts your abilities as a marketer or your approach to your current job?

Ratna: Yeah, so remember how I said I started on the phones? Two years in, some very wonderful people at Bank of America took a chance on me and saw some things in me that they believed in. I joined their leadership development program, and it was just 10 people in this program. In that program, they made you do every single job: sweeping the floors after a party, collecting on people who maybe applied for a credit card but never had the financial education to balance debt and an income properly, customer service like selling credit cards at a NASCAR statement, which is which is not as easy as it sounds and it doesn’t even sound that easy.

From that program, I learned two things. One is the importance of leading by example. You need to be able to look at your team in the eye. There are a lot of things that I am asking of you, and it matters that I have either done them myself or would be willing to do them when times get tough. That just gets you a lot of credibility when you’re leading teams of people or large teams of people. When I’ve done the job, the people I’m leading understand that I’ve walked a mile in their shoes.

The second thing that I learned from that job is empathy is very, very necessary. Leading and managing is a privilege, it’s not a job, you didn’t earn it, you’re not entitled to it, you have to earn it on a daily basis. It is important, when you are sitting across from someone having a business conversation, to understand the person across there is a human. They brought a lot of their personal situation to work that day and at the end of the day, they’ll go back to that personal situation. You have to understand that that’s who they are. They’ve got dreams, aspirations, concerns, a lot of things.

That lesson has become more and more important to me, the larger the teams that I lead and the broader the spectrum of people I’ve led from very early career to later in their career. You have to think of the human first, even before you get to the business sort of side of things.

Pet Peeves

Fee: That’s an excellent answer. Do you have any pet peeves?

Ratna: I’d start with my own patience is my own pet peeve. I wish I was a more patient man.

I’ll tell you what I enjoy and then you can interpret that on the other side of that coin in terms of maybe what I don’t love as much. I like positive people, especially when I manage teams. I especially get a lot of energy from people who see opportunity, they identify problems, they’ve got a solution going forward. They know what they need from you to solve the problem and they ask for it. I love that.

I love and I get a lot of energy from positive people. We talked about a career, which is more than just the sum of the parts, right? It’s the narrative. It’s the team culture. It’s the camaraderie you build with your team, with your directs, and then even with your boss. And so, because I love that so much… have you ever sat across from someone where it feels so apparent that it’s a chore for them to even be there? The first time, you get it. The second time, you’re like, okay, fine. But by the fifth time, you’re asking am I  doing something wrong, or do you just not want to be here? How do I make this a more positive experience for everyone involved? That’s something that just sort of drains my energy and I’m a big believer in bringing your energy to work.

I’m very grateful to work in the industry that I get to work in, the one that you work in. And what I really appreciate are the people – I call them volatility eaters. There’s always going to be times where things go up, things go down. There’s a sense of inspiration you get from people who just manage the volatility and have this calmness about them to say, “we’ve seen this before. We’ll get through this.”

I try and do this with my team. I really appreciate that and maybe not so much the volatility amplifiers.

Living Through Your Career

Fee: Totally makes sense to me. What daily habits or weekly routines do you have that keep you sharp as a leader or evolving as a marketer?

Ratna: I’m constantly thinking of myself as a client, as the customer. I wake up and go to sleep with that mindset. So, it’s like if you asked me again, “what’s difference between career and a job?” Job is you put your job hat on, take it off. A career is lived through.

So, one thing that keeps me sharp is I’m constantly thinking about my client experience, what I like about it, and what could be better.

Then, on the flip side of the coin, how’s that impacting the hundreds and thousands of clients of mine? Benchmarking! I love, love, love looking at other industries and downloading apps from things that I may not necessarily be that interested in. But I downloaded just to learn how they are talking to their clients and teasing out what can I learn from them.

Those two things make sure that I never get complacent or stale. I’m always participating in a relevant conversation, I’m learning from in the industry but also outside the industry.

Then the last thing is, honestly, the people who keep me not complacent and mentally young, the teams that I hire. I take big bets on people with high potential. I’m probably more willing to lean on potential versus proof. I don’t hire Jon Fee because he’s already proven himself to be a great marketer. You don’t get any alpha for that, there’s no prize. The betting on potential though – I’m a big believer in that. That’s real leadership. Courage. A bet on very talented directs. Sarah Alexander was one of them. Their natural curiosity and their runway, and the fact that they care so much and get better keeps me learning from them.

Ratna on Being Inclusive

Fee: Yeah, that makes a lot of sense. And Sarah is definitely someone who will succeed no matter what role you put her in! Let’s pivot over to volunteerism. How do you give back?

Ratna: I forget what it is called, but there’s this diagram of how, when you start, a job becomes a vocation. But ultimately, you end up on a purpose and mission. Early on in your trajectory, it’s about timing. It’s mostly about what you need. You need to be able to pay your bills, pay rent – that’s a job. When you get good at it, it becomes a vocation. Hopefully by the time you’re done, what you do intersects with what the world needs and it becomes closer to a mission and a purpose.

So a lot of what I do today is very active. I care passionately about the DEI front, and being able to help people tell their stories and to understand other people’s stories because I love this country.

I grew up in Bangkok, Thailand, and my earliest memories of some of the nicest most inclusive people were these amazing people called Americans. And one was a Hawaiian teacher of Hawaiian descent. One was white, and one was black. But they were all called Americans. And they talk to each other like Americans.

It was just so inclusive before I even knew what the word inclusive was. They were the first to make me feel very included. So, age eight or nine, I told myself, “I’m going to live in America someday.” I just knew wanted to be around these people.

I’m here and I love being part of this country. But there’s still a lot of work to be done. So, while this country has been very good to me, I now need to pay it forward and make this country feel more inclusive for people who are trying to participate and have that representation.

I’m very active on that on DEI front at Vanguard and then second is just mentorship within the company and outside the company. Again, I think I’ve had the privilege of having people teach me a lot of things where I made unintentional mistakes, or lift me up when I needed it. I remember a lot of those lessons and I still have that passion, that fire to lift someone else up. Similarly, I want to help someone who’s got all the acumen, all the energy, all the drive, all the attitude and just needs a little help pointing them in the right direction. So, I do that as well.

I’m a very present dad at home right now — I probably will get even more involved with the nonprofit or nonprofit board.

Digital Transformation

Fee: Excellent. I love that answer. I appreciate that you’re doing that work and living that mission. Let’s chat about digital transformation. Without using the words “digital” or “transformation,” define what that term means.

Ratna: Yeah, I think that’s a great question… leaders and marketers should be asked that question more often. Even that term is such an inside-out term. It’s speaking from the lens of the company, the channel, what the company is trying to do. Really, the way I think about my job is how do you show up for the client when they need you? How do you meet the client, where they are, with what they need when they need it, and do it in a delightful way so they actually appreciate you reaching out to them?

That’s all digital transformation is. We call it a “transformation” because, well, a lot of our old ways of doing things need a rethink, because our clients are now either in different places or talking to us in different ways or in need of different things. That’s really all a digital transformation is. But at the end of the day, all it’s always been about is the client or the customer.

Fee: That’s a great answer. What’s something nobody’s thinking about in terms of digital transformation, but that you’re keenly honed in on?

Ratna: I don’t know that no one is thinking about them. I’m sure there are very talented leaders and marketers who are also thinking the same way.

The first thing is that while the word transformation is described as digital, there is a huge human element to this. On the work side. So, the digital transformation done correctly involves a lot of change management, a lot of upskilling, rescaling, a lot of reassurance.

People who lead large teams may have been doing a thing a certain way, and you cannot ever let your transformation capabilities be asymmetric or overtake your change management strategy and your thoughtful human approach.

Sometimes the appetite for doing cool things makes leaders move too fast without bringing the people along or having a thoughtful human capital strategy. It’s not going to work. And it’s also just not very humane.

So, there’s a whole human or humane side for digital transformation at large companies that you really have to be thoughtful about.

Talking about generative AI, there are a lot of implications for that. And as much as half of my brain wants to lean in, because this is the kind of thing that I find super attractive and it has great client potential, my conscience is thinking about, how do I do it in the right way, with people involved?

So that’s one. The second one, and this is going to sound a little meta or a little esoteric, but I increasingly think about that most fiduciary or social responsibility marketers need to play when it comes to marketing and advertising more and more.

Here’s what I mean. You talked a little bit about digital transformation, right? We have to consider that four or five decades ago information was largely symmetric and followed the normal distribution, meaning, you went and got your news. Hardcopy. Wall Street Journal, New York Times, the Economist. We all shared the same tomes of information and it was built on a normally distributed curve. There was no personalization, there was no streaming of news, there was no hashtags of interests. Everyone had the same set of facts, whether they were right or wrong, they had a consistent set of facts. This consistent place that had to, by virtue of large publication, normally distribute interests and information.

That has changed. Now you can do hyper-personalization, you can reinforce notions, in a way that humans are maybe thinking, “well, here’s all the information I have, I’m going to assume that’s normally distributed information. That’s what the world is.” But all I’m doing is reinforcing a loop, getting you further and further polarized from a set of facts. And so, with great digital power comes great digital responsibility.

It’s not about just selling things, you have to also balance it out. You have a responsibility to balance it out. The right intent, what is right for the client? What is right for the customer? What’s right for the audience, what’s right for the reader? And so that responsibility of marketing is something that I think about a lot, especially as the world gets more digital, and personal.

Fee: I think that’s something that we should all very much be thinking about. Terrific answer.

Ratna: It is becoming easier as a marketer, you now have more in your arsenal. The goal isn’t necessarily just to sell, you have to have to be responsible.

Looking Into the Crystal Ball

Fee: What’s a headline you expect to read in the next five years?

Ratna: I cannot yet give you something, the concrete headlines. But my bet is – and you’re already seeing it, headlines around what it means to be to be a productive member of society.

I think technology has this long build and then it gets exponentially more powerful.  A lot of tasks that we are asking the human brain – which is this beautiful, ultra-creative, cognitive machine – to do are still highly rote and monotonous. We’re paying people to do the same thing they’ve already done.

And just with how far generative AI has come, how far our remote and virtual capabilities have come right, where robotics has come, how far data has come – data models and cognition and decision-making engines.

The confluence of that is going to be an exponential multiplication of those capabilities, we’re going to see the rote things taken out of society. Which is scary, don’t get me wrong. But also, a lot of headlines that I’m hoping to see are also highly uplifting ones because it places a premium on creativity, like true creativity, true original thought. You asked about dream jobs. I’m hoping to see a rise of dream jobs in the future.

A Parting Gift From Ratna

Fee: I love that. Before I let you go, can you share with us an album, book, movie, TV show, or other creative work that’s bringing you joy right now?

Ratna: I grew up loving all of Sherlock Holmes, like every single story I’ve read. I just think Doyle was actually a very expert writer. His language and construction of the English sentence is expert. The topic was very interesting, obviously. But it’s more than just about detectives, I love the way Doyle wrote.

Obviously, its very sad that there are no more stories to be had, except I went to the library the other day. I saw a book titled “Mycroft and Holmes”, written by Kareem Abdul Jabbar. And he’s actually a brilliant author. He’s also a brilliant writer, and a civil rights activist. He’s just a brilliant man. He contributes to the New York Times and New Yorker and is just very, very thoughtful. I just love seeing this side of him. So, I’m enjoying the book, I’m enjoying the protagonist, but I especially enjoy the story behind person writing this book and how he’s had so many chapters of his life. He’s redefined the concept of a job or career, where he can be a basketball star, a civil rights activist, and now an author.

Fee: That’s brilliant. Thank you so much.

This article was originally published July 12th, 2023 on ETF Trends.

Last week, VettaFi Investment Strategist Cinthia Murphy moderated a discussion on marketing attribution featuring Ozzie Solares, global head of integrated media & analytics at J.P. Morgan Asset & Wealth Management, and Mitchell Home, head of digital products at VettaFi. The conversation centered around how to structure effective attribution frameworks. 

View  Attribution in action: Driving growth with media.

The challenge

In an early poll, attendees were asked how confident they were in connecting media spend to results. Forty-seven percent of respondents said they were not very confident, and 41% said they were somewhat confident. Only 6% said they were very confident. 

“This is a challenging space,” said Solares. “The landscape isn’t exactly doing us any favors, and it continues to evolve.”

Murphy added that the abundance of data available today compared to prior years makes it seem like it could be easier to connect dots and find accurate marketing attribution. While the volume of data creates opportunities, it can also create issues. “The landscape itself is increasingly fragmented,” Solares added.

Home noted that media spend can often take time to show value, even though asset managers typically look at spend monthly. This means marketers often need to “justify” their existence. Without good attribution frameworks, this can be particularly challenging, even though the right kind of spend can have a compounding effect over time. 

Where to start with attribution frameworks

“Before you talk about what your attribution framework is going to be, you need to take inventory of yourself and your business,” Home explained. Determining what data matters and why, as well as what core questions you want to understand, is critical to setting up a good attribution model that fits your organization. 

The first thing to do is take stock of your data. Do you have access to the right data? Do you have the right talent and infrastructure in place to effectively leverage it? Once addressed, you should align all stakeholders through clearly defined campaign goals and objectives. All departments should agree on the key metrics. From there you can organize your data and assets. Institute data processes and standardize the tracking of campaign assets.

It is worth noting that looking at the broader data landscape is also important. There are regulatory challenges and layers of transparency when it comes to different data sources.

With a foundation in place, you can determine your attribution model based on data maturity and goals. 

Models to consider

As organizations look at their data and their needs, they need to figure out how they are going to attribute their media spend.

In terms of complexity, the most straightforward is a single-touch method, which gives 100% credit to one source. For example, someone who ultimately converts might do so after clicking on an ad. That ad gets the full credit for the conversion in a single touch model.

Multitouch is more complicated, as it distributes credit across sources depending on pre-set criteria. A data-driven model goes a bit deeper to calculate the precise influence and contribution of each touchpoint. “Data is king here. You have to really understand what your data capabilities are,” Murphy added.

Solares noted, “As you mature, you are going to find yourself using a myriad of models.” He continued, "Each model lends itself to a different use case.” Understanding the entire scope of your interactions is critical, according to Solares. “It is easy to give credit and subsidize lower funnel,” Solares noted. Multitouch attribution can help give more credit to the upper funnel.”

Overall, you’ll need to select the attribution model that best fits your data maturity. Given the limitations of the single touch model, Solares pushed for firms to explore multi-touch and algorithmic models, though it is worth noting that more sophisticated approaches take time and expertise. Still, the commitment of these resources will result in a clearer attribution picture that makes it easier for leadership to understand the value of combined upper- and lower-funnel efforts.

Fragmentation & how to set yourself up for success

Home discussed that even as technology has advanced, data availability and fragmentation constantly changes. He pointed to Twitter as an example, where data used to be transparent and accessible, which isn’t the case anymore since the app changed ownership.

Solares noted that marketing mix modeling is more forgiving when it comes to the availability of data, as it uses aggregate sales and marketing data. While the multi-touch attribution model focuses on a bottom-up analysis of individual touchpoints in a customer journey, marketing mix modeling is more top down, analyzing aggregated data and leveraging online and offline sources. This approach accounts for seasonality, competition, and other factors while a multi-touch attribution model is limited in how it considers external factors. Multi-touch can be useful for short term ROI and tactical optimization, but a marketing mix model will be more useful for strategic planning and budget allocation, as it is more robust and broad in scope.

How to navigate leadership conversations

The session then discussed how to approach attribution conversations with your leadership team. At the end of the day, businesses have limited resources and are looking for the best return on any investment. As you develop your business case for best attribution practices, this is important to remember. “When engaging with sales, they are self-interested, because they want to be able to drive revenue,” Solares said. This makes sense, as sales departments often get paid purely out of what they mark off as a sales success. Marketing departments, meanwhile, also need to show their impact, which could result in competing interests when it comes to attribution. “The key thing is marketing is a partner to sales,” Solares added.

Home concurred: “You don’t want to be thinking about it as competing with sales for attribution; you want to be partnering with them.”

Conversations around attribution can be challenging, but they boil down to storytelling and good data. Remembering the decisions CEOs and leaders are making can help better tell the story. It is the CEO’s job to look at the landscape and the available resources, and allocate for the biggest impact. “I love the concept that this all comes down to storytelling in the end,” Murphy said.

There are often multiple pieces of marketing in play, multiple data vectors, and a wealth of information to sort. Good attribution and marketing requires lots of little things to all go right together. It can be easy for something simple to go awry and provide bad (or incomplete) information, given the amount of balls in the air. ”Don’t let perfect be the enemy of good. Some attribution and some confidence is better than none at all,” Home added.

Solares emphasized the importance of acknowledging the realities of your data and your organization's internal communications. “Spending a lot of time on the foundational stuff pays dividends down the road,” shared Solares.

Key takeaways

As asset managers look for attribution structures that makes sense for them, here’s what to remember:

  • Foundational steps pay dividends. Taking the time to be 100% honest about the data you have and the data available to you, coupled with understanding what your organization needs, is critical for success. Attribution is complex. Taking time to plan and implement is key.
  • Data is part of storytelling. As you look to get buy-in for marketing programs or initiatives, remember that data and storytelling need to be intertwined. Don’t neglect one for the other; use them in tandem to get leadership on to your page.
  • Attribution constantly evolves. Data sources change over time, as do organizational needs. Your attribution strategy needs to constantly evolve, and your data needs to constantly mature.
  • Other departments are partners, not rivals. As every department competes for limited resources, remember that the entire enterprise grows or fails together.

Drones, also known as unmanned aerial vehicles (UAVs), are commonly used today for many enterprise applications and use cases across different sectors and industries such as defense, security, energy, construction/infrastructure, agriculture, logistics, utilities, real estate, photography/filming, and insurance. Private consumers even use drones today recreationally and for entertainment such as drone shows. Regardless of the end consumer, the modern appeal of drones lies in their low cost, utility, portability, and technology features integrating drone hardware, cameras, and sensors with software, data integration capabilities, mapping, and even artificial intelligence (AI). 

History of drones

Interestingly, drones are not new; they have been around for almost a century. The first drones were remote-controlled wooden airplanes that the British Navy used for target practice in the 1930s. Over the years, the military has provided most of the funding behind drone research and applications. Private interest in drones did not pick up until the early 2000s, when declining costs for electronic components, advancements in connectivity, and innovations in lithium battery technology made consumer drones economically viable. While consumer drones are designed to be small, inexpensive, and nimble, enterprise drones have also evolved into an economical source of unmanned air power and a tool for data collection. 

Investment case for drones

Pardon the pun, but the drone market is taking off. The drone industry’s rapid ascent is being fueled by the growing number of commercial and military applications, along with a more supportive regulatory environment. 

Commercial applications & use cases

Drone technology is now used for a wide range of commercial tasks. According to Dronell’s 2024 Drone Industry Insights report on commercial drone use, the top industries for drone applications are energy, construction, and agriculture, with the top applications being drone mapping & surveying, drone inspections, and drone photography and filming. The graphic below highlights the fact that every major industry in the world is now using drones thanks to innovation in sensor technology, software, connectivity, and battery life. The global commercial drone market is expected to grow to $57.8 billion by 2030, achieving a compound annual growth rate of 8%. Flexibility is another key element leading to the rise of commercial drone adoption. Drones come in a variety of price points, shapes, sizes, and weights. They can adapt payloads and sensors aligned with specific needs and financial resources.

Commercial Drone Use per Industry & Method

Increased military adoption

In a world of rising global instability, drone technology is playing a pivotal role as a military asset. Military drones are used for intelligence, surveillance, reconnaissance (ISR) and targeting, facilitating precision strikes with situational awareness. Military drones are equipped with sensors such as high-resolution cameras, infrared and thermal sensors that can identify targets and threats. These drones also use advanced communication systems such as satellite and secure data transmission methods like Li-Fi (wireless communication using light transmission). And today’s military drones also integrate AI and machine learning to enhance autonomy and improve the accuracy of decision making. 

Some of the key use cases for military drones include:  

  • Intelligence, surveillance, reconnaissance (ISR) - Drones equipped with advanced sensors, cameras, and satellite imaging monitor enemy movements, map terrain, and relay this information to troops on the ground. 

  • Precision strikes - Armed drones or unmanned combat aerial vehicles (UCAVs), armed with missiles to attack targets identified during ISR.

  • Logistics - Drones can be used to deliver supplies and equipment efficiently to difficult-to-reach areas. 

  • Counter drones - Drones can be used to jam or disrupt enemy communications and systems.

  • Simulation - Drones can be used to simulate real-life enemy aircraft and missile scenarios. 

  • Secure communication relay - Drones can serve as mobile communication nodes to securely relay information among battlefield units. 

  • Force & special ops protection - By providing continuous, real-time surveillance information from a high altitude, drones can help protect troops and support special operations.

  • Drone swarms - Increasingly, drones are being used in “swarm” configurations, with coordinated groups of autonomous drones being used together for tasks such as surveillance or an armed attack. 

  • Interceptor drones & nets - Interceptor drones can be equipped with “nets” to physically capture or collide with hostile drones. Other countermeasures to drones and drone swarms include jammers and lasers designed to neutralize them individually and en masse. 

Drones have become a game changer for 21st-century military strategy. The modern military favors using drones given their ability to reduce the loss of human life, provide a cost-effective alternative to expensive military aircraft, and provide operational flexibility unmatched by manned aircraft solutions. All of this has played out in real-time during the Russia/Ukraine war, which has amplified the utility of having small, maneuverable, and adaptable air systems that reduce the risk to military personnel. As we have seen first-hand in that military battle, a $700 drone can knock out a multimillion-dollar tank. Drones are relatively inexpensive, small (making them harder to detect), able to inflict significant damage, and capable of posing a disproportionate threat. Drone technology can be used defensively as well. Europe is currently considering implementing a “drone wall” to counter recent acts of hybrid Russian aggression. A “drone wall” is not a physical wall; it layers a network of detection and interception systems building on already-existing anti-drone capabilities.

It is no wonder that the global market for military drones is growing rapidly. It is expected to reach $88 billion by 2030, with a compound annual growth rate of 14%, propelled by increasing military budgets. This growth is being driven by rising geopolitical tensions, increased military budgets aiming for greater cost efficiency and flexibility, and technical advancements in drone technology, including AI-powered surveillance and autonomous capabilities. 

Some of the largest military drone manufacturers include U.S. companies such as General Atomics, Lockheed Martin, Northrop Grumman, AeroVironment, and Kratos Systems; Turkey’s Baykar Technologies; and Israel’s Elbit Systems.  The table below provides a list of top military drone platforms and their strengths.

Top military drone manufacturers (2025)

Company

Country

Key Platforms

Strength

General Atomics

U.S.

MQ-9 Reaper, Predator

Long endurance strike & ISR

Lockheed Martin

U.S.

Stalker, Desert Hawk

Cutting-edge autonomy & VTOL

Northrop Grumman

U.S.

Global Hawk, Triton

High-altitude, maritime ISR

Baykar

Turkey

TB2, Akinci

Export-ready combat drones

Elbit Systems

Israel

Hermes 450/900

Advanced ISR tech & sensors

IAI

Israel

Heron, Harop

Loitering munitions & ISR

AeroVironment

U.S.

Raven, Puma, Switchblade

Small tactical drones

Kratos

U.S.

XQ-58 Valkyrie

Loitering loyal wingman

Anduril Industries

U.S.

Fury, Ghost

AI-loaded autonomous UAVs

Hinaray Technology

China

HN-VF55P, HP100/200

VTOL/hybrid & counter-drone systems

Source: Hinaray Technology

Changing regulations

The U.S. Department of Transportation has proposed a sweeping new rule that would finally normalize beyond visual line of sight (BVLOS) drone operations. This long-awaited milestone for the commercial drone industry, introduced as Part 108, is being hailed as a transformative framework that will allow drones to operate beyond the operator’s visual range without the need for individual waivers. At the global level, International Civil Aviation Organization (ICAO) Council Unmanned Aviation and Advanced Air Mobility standards are also being updated and reformed to address remote pilot systems. 

Our index approach

The VettaFi Drone Index (DRONES) is an index comprising global companies that provide exposure to drones and unmanned aerial vehicles (UAVS).  The index contains companies that are engaged in drone/UAV manufacturing and enabling technologies.

To be eligible for inclusion in the index, constituents must have a minimum thematic exposure as follows: 

  • Constituent business operations must derive more than 20% of their revenues from drones/UAVs or enabling technologies, or 

  • Constituents must be a defense company with a division/program designated for R&D of drones/UAVs.

At time of quarterly rebalance, companies must have a market capitalization of at least $100 million USD or $75 million for current constituents, a 15% free float, and a three-month average daily traded value of $500,000 USD, or $400,000 USD for current constituents.

The Index uses a modified free-float market-capitalization-weighted algorithm with companies weighted either within a pure-play or diversified tranche. 

Pure-play companies must derive at least 50% of their revenue from drones/UAV manufacturing or enabling technology. Diversified companies must derive at least 20% of their revenue from drones/UAV manufacturing or enabling technology; or be a defense company with a division/program designated for R&D of drones/UAVs. Eighty percent of the index is in the pure-play weighting scheme to ensure meaningful drone industry exposure.  

For more information about the VettaFi Drone Index (DRONES), click here. The index has been licensed by RexShares for the Rex Drone ETF (DRNZ), which is expected to launch in October.

Index rebalancing is a periodic process of adjusting an index’s composition and weightings to maintain its investment goals. The way an index is weighted ensures a product is accurately exposed to the securities and assets that best fulfill that purpose. 

Done poorly, rebalancing can drive up transaction costs, strain liquidity, and increase tracking errors. Managing these impacts comes down to timing, process, and risk management. Here’s how to optimize your approach to index fund rebalancing, including key considerations when it comes to timing, cost, and frequency.

Why does index rebalancing matter?

The index is the specific benchmark funds use to achieve their goals and measure performance. Without regular rebalancing, indexes drift from their original objectives. For example, a small-cap index might accumulate mid-cap stocks, or a balanced index could become overweight in one sector after a rally. 

This creates tracking errors for benchmarked funds. When left unchecked, these issues can escalate and upset investors, violate fund mandates, or lead to redemptions.

How to rebalance an index in five steps

Indexes need to periodically rebalance in order to keep up with the markets, or else they will become inaccurate. Use this five-step index rebalancing process to guide you.

1. Create a schedule

The first step is establishing a rebalancing schedule. A published schedule alerts market participants to potential changes and reduces opportunities for manipulation. It also helps asset managers prepare for increased volatility and trading volume around rebalance dates.

The key decision is frequency. More frequent rebalancing (quarterly) keeps the index accurate but increases operational workload and transaction costs. Less frequent rebalancing (annual or semi-annual) reduces costs but allows more drift from the index’s objectives.

Most major stock indices rebalance quarterly or semi-annually. The S&P 500 index rebalances quarterly in March, June, September, and December. FTSE Russell is shifting from annual to semi-annual rebalancing in 2026 (June and November). The trend toward frequent rebalancing reflects increasing market volatility and fluctuations in the financial markets.

2. Develop a standard procedure

Standardized procedures matter because predictability reduces costs. When you know how an index provider conducts rebalancing, you can anticipate changes, assess liquidity constraints ahead of time, and execute trades more efficiently. Transparency in methodology – in other words, knowing exactly what data inputs and criteria drive rebalancing decisions – lets you prepare rather than react.

“VettaFi’s Index Factory offers the most transparent index rebalancing process in the industry, providing users with full details on data inputs and calculations that went into building out the portfolio,” said VettaFi Chief Product Officer Brian Coco. “The insights gleaned from this enable distributors to effectively communicate with the end investors showing not just the ‘what,’ but also ‘how’ and ‘why.’”

Having a concrete, well-defined process can make the index rebalance less onerous and less disruptive for any benchmarked funds.

3. Conduct an initial review of assets

Before rebalancing, thoroughly review all index assets. This helps you identify potential execution challenges and cost pressures ahead of the rebalance date.

These are the key points to analyze:

  • Trading volume and liquidity. Flag securities with low average daily trading volume (ADTV). These are candidates for early execution or staged trades to avoid stock price impact.
  • Market capitalization changes. Identify which stocks have drifted across cap boundaries and may be removed.
  • Sector weights. Check if sector concentration has shifted significantly, signaling potential additions or deletions.
  • Recent performance outliers. Stocks with major price movements may trigger weight adjustments or removals.
  • Bid-ask spreads. Wide spreads indicate liquidity constraints that could increase transaction costs.

Focus on liquidity metrics. Securities with insufficient trading volume create price impact when you execute large block trades during rebalancing.

4. Set inclusion criteria

To properly assess the data from your initial review, make sure you understand the index’s inclusion criteria. This will help you anticipate which securities will be added or removed during rebalancing. 

Here’s a look at some of the most common inclusion criteria to monitor:

  • Market capitalization bands. Stocks that have grown beyond small-cap thresholds or fallen below large-cap minimums will likely be removed.
  • Minimum liquidity requirements. Securities failing to meet minimum average daily trading volume (ADTV) face exclusion or delisting.
  • Sector balance rules. Indexes with sector caps or targets will adjust holdings if one sector has grown too dominant.
  • Geographic eligibility. Changes in primary listing location or revenue sources can trigger removals.
  • Financial metrics. Some indexes require minimum profitability, dividend yields, or valuation ratios (P/E, P/B).

Track the above criteria against current holdings to predict which securities are likely to be added or removed. This lets you identify potential liquidity issues and plan your execution strategy before the rebalance effective date.

5. Weight the stocks in your index

Once you understand the inclusion criteria, look at how the index methodology determines weightings. Most indexes use one of three approaches: market-cap weighting, equal weighting, or factor-based weighting.

For market-cap weighted indexes, calculate each holding’s updated market cap to determine how weights have shifted. Stocks with strong performance will have grown as a percentage of the index and may need to be trimmed, while underperformers will require additional purchases to maintain target weights.

Use this analysis to prioritize your trades:

  • Large weight changes (>1% shift) require careful execution planning to minimize market impact.
  • New additions often see price increases as multiple funds buy simultaneously, so consider pre-positioning if allowed, or waiting until post-rebalance.
  • Full deletions face selling pressure and potential liquidity gaps. Start unwinding these positions early across multiple days.
  • Small weight adjustments (<0.25% change) can be efficiently executed on rebalance day.

Calculate the estimated share quantities you’ll need to buy or sell for each security. This helps you identify which trades will strain liquidity and require staged execution, versus which can be handled in a single order.

Read about: ETF vs mutual fund: 9 strategic considerations for asset managers

Best practices for asset managers

As your index partner rebalances a product benchmark, follow these strategies to minimize costs, reduce tracking errors, and keep the process efficient.

Prepare before the rebalance

Prepare for and anticipate changes by analyzing low-liquidity assets with low average daily trading volume. Review “problem” stocks that are underperforming and check if any securities in your fund have had significant market cap or sector weight changes.

Calculate the exact share quantities you’ll need for each add, delete, and weight change based on your analysis of the inclusion criteria. This helps you identify which trades will strain liquidity and require staging, versus which can be handled in a single order.

Strategically execute trades

Spread trades over multiple trading days rather than creating a spike on a single day. Parcel out trades a few days before, during, and after the rebalancing to reduce market impact and lower transaction costs.

  • For new index additions, consider waiting until after the rebalance date to buy. As the index reconstitutes, buying activity from multiple funds can drive prices up. Waiting until after rebalancing can help avoid inflated costs.
  • For full deletions, start unwinding positions early across multiple days. These securities face selling pressure and potential liquidity gaps as multiple funds exit simultaneously.

Prioritize trades by size and liquidity. Large positions in illiquid securities require careful execution, while liquid positions can often be traded on rebalance day.

Monitor and measure your results

Compare your fund’s performance against the rebalanced index immediately. Identify any significant tracking error deviations and determine whether they’re the result of execution timing, liquidity constraints, or other factors. Use these insights to improve the handling of your next rebalance.

Track the total cost of rebalancing across asset classes, including commissions, bid-ask spreads, and market impact. Compare costs across rebalance cycles to identify patterns and improvement opportunities. High costs on specific securities may signal the need for earlier execution or different trading strategies next time.

Communicate with your investors

If there are any short-term performance impacts from rebalancing, address them right away. Remind investors that temporary volatility during this process is normal and doesn't affect long-term returns. Investors are in it for the long haul but can be distracted by short-term effects. Clear communication prevents misunderstandings, reduces unnecessary worry, and keeps everyone on the same page.

Stay disciplined

A thorough, disciplined approach to rebalancing keeps investors satisfied and increases efficiency. Review what did and didn’t work in your execution strategy after each cycle, and keep optimizing your process.

Work with an index provider

The historic relationship between an index provider and an asset manager can be distant. Working directly with a differentiated index partner as they go through the rebalancing process for your benchmarks can create unique opportunities and improve efficiency. 

A transparent index partner, like VettaFi, can help asset and fund managers stay ahead of any changes from the rebalancing process, mitigate tracking error, and support a cost-effective approach to rebalancing. 

Up next: Best practices for launching an ETF

 

 

Last month, Connective Communication’s Jennifer Morgan released Hearts, Minds & Wallets: The Thin Book That Closes Gigantic Deals. The book is a guide for effective communication and pitching, which has relevance in all fields but is particularly important for asset managers. “The frameworks in the book hone in on consultative solutions focused on being in service of others,” said Morgan. 

Here are some key learnings from the book:

Find your differentiators

Asset managers often compete with similar products. As investors look at which ETF or mutual fund they might choose for exposure to a particular slice of the market, they see an array of products that don’t necessarily have a lot of daylight between them. According to Morgan, “People are the standout, especially in financial services where process and performance may be similar to competitors.”

Her book urges readers to consider what they are doing that nobody else is. Making your client service proactive can set you apart from other funds. One of the main ideas driving the book is that consistency + integrity = trust earned. In other words, if asset managers show up consistently and do what they say they are going to do, they will earn client trust. It is simple to connect with clients in a bull market, but harder in a bear market. Laying a proactive groundwork of trust over time will help make for a more resilient relationship when the markets sour.

Time is the most valuable resource

Lots of things matter, but time is arguably the most important thing. Respecting the time of others will lead to stronger relationships. “Be bold. Be Brief. Be gone,” Morgan urges her reader. “It’s important, so we allow others to source and offer ideas, allowing for more targeted meetings.”

It can be very easy for experts to offer a firehose of information without pausing to see if the audience has fully absorbed it. The “be bold, be brief, be gone” tactic allows people to absorb what you’ve told them, then ask questions and follow up at will.

The book also stresses the importance of being early to meetings and making sure to wrap them up at the appointed time. Morgan suggests creating agendas in advance. This sets expectations and lets attendees know what might be expected of them. Morgan shared, “The gift of our and others' mutually shared time is increasingly important in the fast-paced world we live in.”

The importance of word choice

“Writing the book helped me focus on the increasing importance of the words we use and how they make others feel,” said Morgan. 

The ability to simplify the complex and to communicate with the other person in mind is an act of compassion. Asset managers who can synthesize complicated ideas into digestible words will have more success with prospects, especially if they can communicate with an understanding of who the prospect they are talking to is. 

Morgan also recommends the Driscoll model for making any individual communication as effective as possible — be it a keynote address at a conference or an email to a prospect. That model is, essentially:

  • What
  • So what
  • Now what

“What” covers the reason for the communication. What is the goal?

“So what” covers why the specific communication matters. What is in it for the audience/recipient?

“Now what” is the call to action. Her book urges marrying this framework to an agenda for the best results. 

Level up your communication skills

Communication falls under the umbrella of what modern society thinks of as a “soft skill.” But, in reality, it is something that anyone can learn and get better at. Morgan’s book is an excellent starting place for any asset manager looking to be more effective and stand out amid the sea of sameness. 

 

VettaFi, a differentiated index provider with modern distribution solutions and a subsidiary of TMX Group, announced today the acquisition of a suite of three indices from Range Fund Holdings and North Shore Indices, including the Range Nuclear Renaissance Index (NUKZX). 

Brian Coco, Chief Product Officer at VettaFi, stated, “The acquisition aligns perfectly with our mission to offer investors specialized exposure to powerful, long-term megatrends.”

The acquired indices, which track nuclear energy and uranium mining companies, arrive at a time when the investment case for nuclear power is stronger than ever.

The investment case: Powering the AI economy

The nuclear sector is being driven by a powerful confluence of policy tailwinds and exploding electricity demand, creating compelling investment opportunities:

  • AI and data center demand: The proliferation of data centers to support the massive processing needs of Artificial Intelligence (AI) is driving a ravenous demand for reliable, always-on electricity. Nuclear power is uniquely positioned to serve as the foundational, clean power source for this critical new infrastructure.
  • Policy support and renaissance: Global policy, including recent U.S. and Eurozone initiatives, increasingly supports nuclear energy as a foundational pillar for meeting both growing energy needs and carbon reduction goals. This environment is seeing old reactors come back online and new technologies gain approval, such as NextEra Energy’s recent approval to restore a reactor in Iowa.
  • Proven performance: The Range Nuclear Renaissance Index ETF (NUKZ) tracks the Range Nuclear Renaissance Index. The ETF has already demonstrated strong momentum, delivering a 59% year-to-date return and accumulating over $630 million in assets. NUKZ significantly outperformed its category and segment averages in a rapidly growing sector.

Unique exposure to pureplay downstream 

The Range Nuclear Renaissance Index offers investors a differentiated, pure-play approach to nuclear energy. Unlike competitors, the index focuses on downstream utilities, reactor operators, and technology developers, positioning it to directly benefit from end-user demand and recent pro-nuclear policy shifts, and allowing investors to capture value from the technology innovators driving the sector.

Expanding indexing scale and expertise

This acquisition marks the sixth by VettaFi in the last few years, showcasing both its commitment to expanding on a legacy of offering innovative index capabilities to meet client needs and its world-class index platform. With the addition of these nuclear indices, VettaFi now boasts an indexing platform spanning more than 1,250 indexes across all major asset classes.

This article was originally published on ETF Trends.

Direct indexing has long been on the radar, but is gaining serious traction with financial advisors and individual investors. It’s particularly attractive to high-net-worth individuals who are looking to reap the benefits of tax-loss harvesting. 

As tools develop and advisors seek more personalized investment opportunities for their clients, here’s what asset managers need to know about direct indexing vs ETFs.

Why advisors are shifting to direct indexing

Direct indexing offers investors customized solutions and the ability to invest in individual securities within an index rather than investing in the fund itself. This is an attractive proposition to many investors. In comparison to ETFs, index funds, or mutual funds, it gives investors direct ownership of the individual stocks, creating more flexibility and new opportunities.

Advisors are increasingly turning to direct indexing. Below, we explore some of the reasons driving this shift.

Tax advantages

Direct indexing doubles as a tax management strategy. Direct indexing can easily incorporate tax-loss harvesting. If an individual stock drops below the cost basis, investors can use that loss to offset capital gains. This lowers tax bills and helps build wealth over time. 

Additionally, because investors own each individual security instead of having everything under one fund, each individual security has its own cost basis.

Investor demand for personalization

Investors are increasingly interested in customization and want personalized solutions with more control over their investment decisions. Not only does customized market exposure have the potential to reduce risk, it can also filter companies based on ESG criteria and allow investors to express their philosophical preferences through their investments. 

It can even restrict sectors or industries entirely. For example, a pacifist might forgo defense companies altogether.

Investor demand for more control

Direct indexing allows investors the opportunity to invest in securities that align with their personal values, helps them meet their investment objectives, and can offer other benefits such as diversification. Many investors prefer this to accepting the broad market exposure that comes with traditional funds.

What does direct indexing mean for client acquisition and retention?

Direct indexing strategies are on the rise, yet exchange-traded funds (ETFs) continue to grow in popularity. This creates as many opportunities as it does challenges for asset managers.

Here’s what your firm should consider when acquiring and retaining clients:

Develop client identification strategies

Target prospects who meet the minimum investment requirements and can justify costs through tax benefits. Focus on high earners in top tax brackets who hold significant assets in taxable accounts, as they stand to gain the most from tax-loss harvesting strategies. 

Investors with concentrated stock positions, frequent portfolio rebalancing needs, or existing relationships with tax professionals are often ideal candidates for direct indexing solutions.

Understand separately managed account (SMA) requirements

SMAs are not ideal for every type of investor. With minimum investments ranging from $100K-$250K, as well as higher costs and fees, direct indexing currently targets high-net-worth investors. SMAs may also have management fees.

Educate financial advisors on value propositions

Create ROI calculators showing tax savings and develop differentiated service offerings that can give your firm a competitive edge and increase the value proposition for your clients.

Consider partnerships with tax professionals and estate planning attorneys

You can attract high-net-worth clients by partnering with tax professionals and estate planning attorneys to provide additional perks and opportunities. These include tax optimization strategies, estate planning coordination, and wealth transfer planning. 

Recognize the popularity of ETFs

Due to low costs, tax efficiency, and broad market exposure, the ETF remains a popular, fast-growing vehicle. ETFs continue to attract billions in new assets each year as investors appreciate their transparency, intraday liquidity, and ability to access diverse markets and strategies with minimal effort.  "VettaFi's focus is building custom index solutions for clients, based on the highest quality data, that result in products that serve investors interests," said Peter Dietrich, VettaFi's Global Head of Index Sales. "Our partners choose VettaFi not just on our index capabilities, but also our ability to help educate advisors and investors what the strategy is and how to use it in a portfolio." 

Use ETFs as client acquisition tools

You can always transition interested clients into direct indexing as their assets grow. Establishing trust through a successful, well-performing product can keep clients in your ecosystem.

Build well-diversified portfolios

It never hurts to build a diversified portfolio that includes direct indexing, ETFs, mutual funds, and every other tool in the box. ETFs are still ideal for investors who are new to investing and want simplicity. They're also ideal wrappers for investors who prefer to invest passively or wish to invest in specific sectors, countries, industries, or trends.

Portfolio creation and management

With client acquisition strategies in mind, asset managers also need to consider how to implement direct indexing. It’s easier to implement direct indexing in a portfolio than you may think, especially since the market for sophisticated tools is only expected to grow.

Technologies that can make direct indexing easier include:

  • Portfolio rebalancing software
  • Tax-loss harvesting algorithms
  • Fractional share trading capabilities
  • Integration with existing custody platforms

Asset managers should consider adding direct indexing investments to portfolios now. By the end of 2028, direct indexing is expected to exceed the growth of ETFs and mutual funds and double to approximately $1.1 trillion. 

Steps for building a direct indexing portfolio

When building a direct indexing portfolio, follow these steps:

  1. Start with a benchmark index or indices that best align with investor goals.
  2. Replicate the index and build a portfolio with individual stocks from that index, tailored to a client’s needs.
  3. Overweight or underweight sectors based on investment objectives, risk tolerance, and factors like value or growth, or look at past performance.
  4. Monitor and rebalance portfolios to ensure they align with the index when necessary.

Diversification opportunities

One other thing to consider is that direct indexing is often centered around the S&P 500 index, which negates some of its diversification possibilities. The S&P 500 represents only the U.S. equity market, leaving out small and midcap companies with growth potential. Direct indexing is an ideal tool to invest in international markets, small and midcap stocks, and alternative U.S. large-cap indexes.

As clients build wealth, it makes sense for them to add direct investing to their portfolio, even if only as a tax savings opportunity. 

According to Parametric’s Jeremy Milleson: “Direct indexing isn’t a whole new asset class, it’s an investment technique designed to fit comfortably with an investor’s existing allocation.” In other words, asset managers can help advisors serve their clients by combining direct indexing with ETFs.

Revenue impacts for asset managers

Because of changes in the investment landscape and the development of tools like direct indexing, asset managers should prepare for the inevitable impacts on revenue.

Noteworthy impacts include:

  • Fee compression risks. Fees are already trending downward as investors and advisors look for the most affordable option on the market.
  • Higher operational costs. Even as fees are becoming more affordable for investors, operational costs for issuers are increasing.
  • Minimum account sizes needed for profitability. Achieving profitability requires larger accounts. Otherwise, operational costs will overwhelm profits.

The margins on traditional fund management are tight. However, while direct indexing requires an investment in tools and capabilities, it can be a significant value add for asset managers. 

The ability to offer tax-loss harvesting, customization, and personalized solutions can justify higher fees and create stronger client relationships that go beyond simple product sales.

How asset managers can adapt their business models for direct indexing

Even with the rise of direct indexing, ETFs and mutual funds have their place. However, asset managers should strive to personalize and adapt their business models using the following methods:

Fee structure transformation

Move beyond traditional AUM-based fees to value-based pricing models. It could also be worth considering transaction-based or performance-based fee components for tax alpha generation. Asset managers can justify higher fees through demonstrable tax savings and the additional value gained for customization.

Expanded services

Adding tax management expertise and capabilities to investment management creates more value for clients. Developing ESG screening tools or values-based investing competencies can bring in more investors. Asset managers need to look beyond basic portfolio construction and create comprehensive wealth management solutions.

Stronger positioning

Differentiate from low-cost robo-advisors through personalized service and sophisticated tax advice. Look at fintech companies that combine tech with human expertise, and carve out a place as a premium service provider for the high-net-worth segment rather than a mass market competitor.

Client relationships

Asset managers could find success pivoting away from simply being focused on product sales and into ongoing advisory relationships that focus on long-term wealth outcomes over the short-term performance of a particular fund. Deepen client engagement through customization and tax optimization.

ETFs vs direct indexing: choosing the right approach

While the benefits of direct indexing are incredible, ETFs still serve valuable functions in investor portfolios. Asset managers must understand when to recommend each approach.

ETFs remain ideal for:

  • Investors new to investing who want simplicity and broad market exposure.
  • Those seeking low-cost, tax-efficient passive investment options.
  • Investors who want exposure to specific sectors, countries, industries, or trends.
  • Smaller account sizes where direct indexing minimums aren’t met.
  • Clients who don't require tax-loss harvesting or customization.

Direct indexing works best for:

  • High-net-worth investors who can meet minimum account requirements.
  • Clients who benefit significantly from tax-loss harvesting.
  • Investors seeking ESG customization or values-based screening.
  • Those wanting to exclude specific companies or sectors.
  • Clients who need sophisticated tax management strategies.

Sometimes, a hybrid approach is best. ETFs can serve as client acquisition tools and provide broad market exposure, while direct indexing can be layered in as clients’ assets grow and their needs become more sophisticated.

VettaFi helps asset managers innovate and evolve to better meet the needs of their clients. Our firm is uniquely positioned to help asset managers develop and distribute the products and services that will be transformative for years to come.




The exchange-traded fund (ETF) is increasingly seen as the dominant investment wrapper. In fact, there are now more ETFs available than stocks available for trade. 

As ETFs take over more of the market share and investor interest grows, ETF liquidity must be factored into investment strategies to ensure successful outcomes. Here are the factors that impact ETF liquidity, including what every asset manager should know about them in order to help their clients achieve their investment goals.

1. Market structure changes and volatility

Liquidity is mainly determined by the liquidity of the underlying assets of a particular fund, as well as the trading activity in secondary markets. 

This means an ETF’s liquidity can be affected by the index it tracks. Well-known indexes like the S&P 500, the NASDAQ 100, and the Dow Jones Industrial Average often have more liquid underlying assets, which in turn gives ETFs that track those indexes more liquidity.

The opposite is also true: If an ETF tracks an index that is less liquid, it can reduce liquidity and make trading that ETF more difficult. A complicating factor in this is that ETFs have an open-ended structure that makes the creation and redemption process of ETF shares innately more liquid beyond what investors can determine from looking at the secondary market.

How to increase ETF liquidity

Market makers can increase ETF liquidity by narrowing bid-ask spreads and making ETF trading easier on the secondary market. 

However, the current market conditions have created a unique scenario. Asset managers who want to keep their ETFs ahead of the market must update their liquidity assessment approaches. 

Some things to keep in mind:

  • Traditional volatility metrics underestimate tail risks. The old models of risk determination are not sufficient, given the unique challenges facing the current market.
  • Stress testing scenarios need more frequent updates. They could also benefit from multiple crisis modeling. 
  • Real-time monitoring is now essential. Intraday patterns matter more than daily averages, demanding real-time monitoring.
  • Early warning systems are needed. In the event of a rapid liquidity deterioration, missing a single beat could have devastating consequences.

Geopolitical events

Regional conflicts can affect worldwide ETF trading patterns. When the United States was in a position of global leadership, there was a certain degree of order that could be relied upon even as conflicts broke out. With the U.S. withdrawing from the global stage, there is less of a backstop.

Sanctions and trade restrictions create overnight liquidity constraints. In prior decades, it was easier to determine which nations might be sanctioned. Some countries can get away with substandard policies and suffer minimal international rebuke, while other countries could be slapped with sanctions despite minimal offense. In other words, supply chains and commodity ETF liquidity have become highly unpredictable. 

Currency restrictions are also disrupting international ETF arbitrage. As the world begins to move away from the U.S. dollar, that could also further sap the global leverage of the U.S.

Climate and ESG events

Another concern is the impact of climate change and Environmental, Social, and Governance (ESG) events. Here are some of the biggest drivers of new volatility patterns:

  • Weather-related disruptions. As hurricanes, floods, and severe storms become more frequent, weather-related disruptions increasingly affect sector ETF liquidity.
  • ESG regulations. As more countries scramble to reduce the impact of climate change, regulatory shifts can create sudden liquidity shifts in themed ETFs.
  • Sustainability-focused ETF flows. With so much constantly changing, the flows of sustainability-focused ETFs have become more volatile.

You might like: 7 tips for cost-efficient ETF operations

2. Trading behaviors

Asset management firms must deeply understand ETF liquidity in order to develop the right trading strategies. This is even more important for complex and large trades. 

When making investment decisions, investors will want to know if the liquidity of an ETF aligns with their investment objectives. ETFs that are less liquid not only cost more to trade, but can be more challenging to trade, too. 

Let’s explore some of the strategies you can use to better understand trading behaviors.

Understanding the ADV

ADV (Average Daily Volume) is a key metric investors look at to determine the liquidity of a fund. It represents the daily turnover and trade volume of a particular fund and can be compared with the current market environment and the number of shares available to trade each trading day.

Analyzing the liquidity of the underlying securities

Keep in mind that the ETF is a basket of securities, and each individual security has its own liquidity. When an investor wants to determine the liquidity of an ETF, they need to consider the daily trading volumes and spreads of those underlying holdings. 

Only authorized participants can interact directly with the ETF issuer, but it’s important for investors to understand the net asset value (NAV) of the underlying securities in the fund in the primary market.

Evaluating primary and secondary market liquidity

ETFs have multiple layers of liquidity, as covered above. This means investors assessing liquidity will look at both the primary market and the secondary market. Primary market liquidity can be different from secondary market liquidity, creating interesting decisions for investors. Asset managers need to understand where their products fit and how their liquidity measures up to both the primary and secondary markets.

Determining liquidity on the secondary market can be more challenging, but the main indicator will be the bid-ask spread. The bid-ask spread represents the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask). Narrower spreads often indicate higher liquidity, as market makers are confident they can easily buy and sell the ETF without much risk.

3. Regulatory changes

Market regulations promote transparency and manage risk, which in turn can help increase liquidity. 

These are the regulations that affect ETF liquidity, which issuers should keep in mind:

  • Rule 22e-4. This SEC rule requires ETFs to put Liquidity Risk Management Programs (LRMPs) in place.

  • Rule 22e-4. This SEC rule requires ETFs to put Liquidity Risk Management Programs (LRMPs) in place.
  • Rule 6c-11. This SEC rule reduces the cost and time involved in launching new ETFs, which can increase market liquidity.
  • Daily disclosures. Regulatory bodies require ETFs to provide daily disclosure of portfolio holdings, disclosure of premiums and discounts, and disclosures of bid-ask spreads.
  • Limits on arbitrage. Regulatory constraints can limit authorized participants’ ability to engage in arbitrage, which leads to greater variances in market prices and NAVs.

How regulations improve liquidity

Some regulations can boost ETF liquidity. Examples include:

  • Disclosure requirements. Understanding the disclosures means investors can soberly address risks and deal in reality, reducing panic and rash decision-making.

  • Disclosure requirements. Understanding the disclosures means investors can soberly address risks and deal in reality, reducing panic and rash decision-making.
  • Custom creation/redemption baskets. Custom creation and redemption baskets can keep trading costs lower and make arbitrage more efficient.
  • Standardized procedures. Standardization reduces risks and keeps processes efficient and effective.
  • Short-selling regulations. Short-selling can lead to liquidity collapse, and proper regulations reduce the likelihood of a short sell.

How regulations reduce liquidity

Of course, regulations can also reduce liquidity. These include:

  • Circuit breakers. Circuit breakers are deployed to halt trading and are a desperate measure to curb panic selling in volatile market conditions. Naturally, they impact liquidity quite a bit.
  • Restrictive regulations on creation and redemption mechanisms. One of the main advantages of the ETF wrapper is its easy creation and redemption process, which is how the wrapper stays liquid. But regulations that restrict that process can reduce an ETF’s liquidity.
  • Restrictions on trading in certain securities or derivatives markets. These restrictions can impact secondary market liquidity.

ETF vs mutual fund: 9 strategic considerations for asset managers

 

4. Alternative and crypto ETFs

Alternative and crypto ETFs are becoming more mainstream. Here’s why these emerging markets are presenting new ETF liquidity dynamics.

Digital asset considerations

The nature of digital assets such as Bitcoin, Ethereum, and other cryptocurrencies can create unusual liquidity dynamics. 

For example:

  • Underlying cryptocurrency markets trade 24/7, while ETFs only trade during market hours. This creates overnight gap risks and pricing dislocations.
  • Extreme volatility in digital assets can cause market makers to widen spreads drastically or step away entirely during stress periods.
  • Regulatory uncertainty around crypto assets creates sudden liquidity freezes when new rules or enforcement actions are announced.

Alternative strategies

Digital assets are not the only new kinds of products upending the liquidity applecart. Complex underlying assets (private equity, real estate, and commodities) often have stale pricing that makes real-time NAV calculations unreliable.

Actively managed ETFs present unique challenges, as frequent portfolio changes can disrupt the predictable composition of creation/redemption baskets, complicating arbitrage activities for authorized participants.

Finally, asset managers need to think about capacity constraints in alternative strategies. Capacity constraints can force ETF closures to new investments, eliminating primary market liquidity entirely. 

Read about: Best practices for launching an ETF

5. Create an investment strategy to minimize ETF liquidity risk

Investor demand for ETF investing continues to increase. Asset managers need to develop investment strategies for ETF investors that better manage liquidity risk. 

Best practices include:

  • Constantly monitoring ETF market conditions.
  • Using limit orders.
  • Avoiding trades at market opening or closing.
  • Structuring ETF portfolios into liquidation tiers.

Looking to build a product that minimizes ETF liquidity risk? 

VettaFi’s index factory can help you build a reliable product that can navigate today’s increasingly complicated liquidity environment.

 

Asset managers are increasingly turning to analytics to optimize how they improve fund distribution, strengthen advisor relationships, and provide investment opportunities. Using data to better understand and analyze the problems facing investors can significantly boost fund flows and performance.

Here’s how issuers are using asset management analytics to target distribution and connect with advisors.

1. Using data analytics to reach the right advisors

Data analytics are crucial for segmenting and targeting the right investors. Asset managers who can deftly use data analytics will better understand what an advisor prospect needs and the nature of their practice. 

Of course, there is no “one size fits all” investment solution. Every advisor is serving clients with different needs, risk tolerances, and goals. An advisor whose practice is mostly catered to older high-net-worth individuals might have very different product goals than an advisor who is trying to help young professionals save for retirement.

Advanced strategies for segmenting advisors

Asset managers traditionally segment advisors by AUM, channel, or territory, but advanced analytics makes segmenting more nuanced. 

Consider advanced analytics segmentations such as:

  • Demographics and investment preferences. This includes but is not limited to age, risk tolerance, preferred asset classes, and investment strategies.
  • Trading frequency and portfolio turnover patterns. Are they looking for niche strategic products, or do they tend to take a “set it and forget it” approach?
  • Technology adoption and digital engagement levels. Are they using the latest technology and tools to gain an edge, or are they comfortable with older approaches?
  • Cost-conscious behaviors. To what extent are they choosing the lowest-cost product available over more popular or successful products?

  • Investment philosophy. How do they approach building portfolios? Are they skeptical about certain themes or particularly drawn toward a type of investment (such as a “gold bug” or “crypto bro”)?

Behavioral and business model segments

Asset managers can also learn a lot about an advisor by looking at their behavioral history and what their business model demands.  

For example:

  • Client age. An advisor with younger clients might take a growth-focused approach, while an advisor who caters to retirees will be more preservation-focused in their advisory practice.
  • Advisor practice size and focus. Is it someone running a small, self-directed shop, or are they part of a full-service wealth management team? The answer will impact the types of products these advisors are looking for.
  • Niche specializations. Some advisors are purely focused on high-net-worth families, while others focus on retirement planning. Generalists exist as well as institutional specialists, but there are also advisors who cater to specific professions. Every profession has unique investment needs, and knowing who an advisor centers in their practice is essential for pitching them products.
  • Fee structure. Finally, whether an advisor works on commission or fees can be revealing. Asset manager analytics can help issuers better identify the fee thresholds and fund types that advisors and investors are seeking when they make investment decisions.

2. Making marketing campaigns more personal

Once you’ve identified your target audience, use segmentation to reach them via targeted marketing campaigns. 

For instance, if you’re a commodities issuer, targeting advisors with a history of investing in commodities at specific times – or who are actively researching commodities – will likely yield better results than a generic marketing strategy. 

Targeting strategies that work

As market conditions and trends change, marketing your ETF to the right advisors is essential. 

These advanced strategies can help:

  • Sector-specific messaging for particular industries such as tech, energy, or healthcare.
  • Risk-level customization for conservative vs. aggressive advisor portfolios.
  • Geographic targeting for specific regional markets or demographics.
  • Market volatility-responsive campaigns that adjust messaging based on current economic conditions.

Customizing your messaging

Not all advisors are the same, so your content shouldn’t be, either. Growth-focused practices need different materials and collateral than preservation-focused advisors or niche specialists. 

Here’s how you can adapt your marketing strategy for different advisor segments:

  • Growth-focused: Practices that are growth-focused will respond to performance, alpha generation potential, and more aggressive allocation strategies.
  • Preservation-focused: These practices will be drawn to risk mitigation studies, downside protection features, and capital preservation case studies.
  • Retirement-focused: Practices that center on retirement will be drawn to income generation capabilities, age-appropriate allocation models, and sequence-of-returns analysis.
  • Wealth-focused: High net worth advisors will respond well to tax efficiency studies, estate planning benefits, and sophisticated portfolio construction tools.

Always keep your sales team in the loop about your targeted campaigns so they can reinforce those concepts when speaking with advisors.

3. Using data to optimize distribution

Analytics provide essential data for improving operational efficiency. Use it to find patterns, correlations, and anomalies that indicate asset health, potential asset failure, distribution bottlenecks, or successful channel performance.

Where to look for data insights

Asset managers who track the right internal metrics can pinpoint precisely where their processes are breaking down, then fix them to save time and money. 

You can streamline your processes by monitoring the following:

  • Sales cycle length analysis to identify stages where deals get stuck or delayed.
  • Lead response time tracking to optimize follow-up processes and improve conversion rates.
  • Resource allocation optimization to find which activities generate the highest ROI.
  • Workflow automation to identify opportunities through repetitive task pattern analysis.
  • Team productivity metrics to balance workloads and improve advisor service quality.

Using data insights to create real improvements

Various sources of data (your CRM, website analytics, and sales records) can be mined for valuable insights. With the right analytics tools, algorithms, and proper data analysis, you can identify opportunities to make your operations more efficient.

Here’s what you should be tracking:

  • CRM data integrations to show complete advisor interaction history and preferences.
  • Website behavior analysis to reveal which content types are driving advisor engagement.
  • Sales pipeline predictive modeling to predict quarterly revenue and resource needs.

4. Predicting what advisors and investors will do next

Successful asset management firms analyze real-time data and historical data sets to forecast advisor adoption patterns and investor demand cycles, helping them improve their resource allocation. 

Historical and real-time data

Here’s how you can combine historical and real-time data for deeper insights:

  • Season investment pattern analysis. Understanding patterns of when something will be in demand can help asset managers time product launches and marketing campaigns for maximum impact.
  • Historic adoption curves. It takes time for a new ETF to gain traction. Understanding how much time it will take for a new product to gain investor attention and adoption is critical.
  • Market volatility correlation. Advisor risk appetite and product demand will be, to some degree, dependent on how volatile the market is at any given moment.
  • Economic indicator tracking. Being on top of economic indicators can help asset managers anticipate increases and decreases in allocations.
  • Resource planning models. Your sales team will have a limited amount of time, energy, and attention. Understanding when you need to increase your bench size can help you meet demand at the right moments.

Predictive analytics

Predictive analytics can also help issuers anticipate investor behaviors to determine who is more likely to purchase or hold an ETF. For example, an investor who is an AI bull might be all in on disruptive tech, while an advisor with a stable of retiree clients might be more interested in products that generate income. 

Use these strategies to determine who is likely to invest where:

  • Scoring models to analyze advisor portfolio composition and client demographics.
  • Trading frequency analysis to identify advisors likely to embrace new products.
  • Client age and risk profile patterns to indicate ETF suitability.
  • Historic product adoption timelines to predict when advisors will move from trial to full allocation.
  • Investment philosophy alignment scores to target advisors with compatible strategies.

Using these analytical approaches throughout the product lifecycle will help you better anticipate market cycles and roll out more effective risk management strategies.

Spotting red flags

Finally, predictive analysis can be a canary in the coal mine. It’s important to know when an advisor relationship is heading south.

Use these early warning systems to identify advisors at risk of reducing allocations or switching to a competitor’s products:

  • Declining engagement. If you notice declining engagement metrics – such as fewer calls, reduced meeting requests, or less frequent email responses – that could indicate an advisor pulling away.
  • Portfolio shifts. If an advisor has made some portfolio allocation shifts and those shifts are showing reduced commitment to your fund family, that’s another sign to be wary of.  
  • Behavioral changes. Direct communication is also useful for data. If an advisor is complaining about the performance of your products or there is an uptick in support tickets from them, it's a surefire sign of growing discontentment.
  • Sentiment analysis. Finally, client satisfaction score trends and advisor feedback sentiment analysis can provide you with additional insights as to the temperature of a given advisor. If the sentiment scores are going down over time, that’s a surefire sign they will start exploring other investment options.

5. Tracking performance to stay competitive

Advisor data isn’t the only type of data that can be used strategically. It’s also important to look at broader performance metrics and competitive positioning.

Tracking ETF performance

By analyzing asset management analytics, asset managers can uncover patterns and trends about how ETFs perform. 

Understanding asset performance patterns reveals information about fund health and portfolio management effectiveness, enabling better-informed decisions. Data-driven decision-making reduces risk and maximizes the value of funds and products. 

Here’s what you should pay attention to:

  • Daily tracking to understand expense ratios, tracking errors, and bid-ask spreads versus category averages.
  • Flow analysis to uncover seasonal patterns and investor behavior triggers.
  • Performance attribution analysis to identify which holdings are driving returns.
  • Volatility and risk metrics monitoring to anticipate rebalancing needs.
  • Correlation analysis with market indices and peer funds to optimize positioning.

Real-time monitoring

Real-time performance monitoring against benchmarks and competitor products provides advisors with data-driven insights they can share with their clients.

Automated daily performance dashboards can help advisors compare returns against a fund’s benchmark or top competitors. Risk-adjusted return metrics such as Sharpe ratio, alpha, or beta can be updated in real-time to provide critical information.

Performance attribution breakdowns are also useful for showing sector and geographic contributions to returns. Drawdown analysis and recovery time comparisons with your product’s peers can give your product an edge if your recovery time is faster. 

In general, big data can help you create better marketing strategies based on outperformance periods and consistency metrics. 

Competitive analysis

Competitive analysis is critical for understanding your positioning in the market. It’s important to know how your product differs from the rest of the field and where you have opportunities to improve or stand out further. 

Some useful vectors of competitive analysis include:

  • Fee comparison analysis. If you are charging higher fees than the competition, you need to justify that premium pricing.
  • Asset flow tracking can identify which competitor funds are gaining or losing market share.
  • Factor exposure analysis can be leveraged to highlight the unique positioning of your ETFs against their competitors.
  • Gap analysis should be used to identify underserved market segments or missing product features.
  • Market share trends and advisor adoption rates across competitor products will also reveal useful data.

6. Measuring and improving advisor relationships

At the end of the day, business is all about relationships. Knowing how to measure those relationships can help you keep your current advisor client list while growing your AUM with new prospects.

Tracking satisfaction and engagement

Issuers need to track advisor satisfaction and use engagement metrics to identify relationship strengths as well as areas for improvement. This can be done through survey scores and Net Promoter Scores (NPS) from quarterly advisor feedback.

Direct feedback is obviously useful, but there are other data points that can be revealing as well. Email open rates, webinar attendance, and content download frequencies can all tell the story of an asset manager/advisor relationship. 

Looking at your team’s response times to advisor inquiries and support ticket resolution rates is also highly useful. Meeting frequency, quality scores from relationship managers, product adoption rates, and wallet share growth over time should all be taken into account.

However, the effectiveness of these metrics depends heavily on data quality. Accurate, timely, and comprehensive data collection is essential for meaningful insights.

Measuring relationship-building ROI

One way to optimize resource allocation is to accurately measure the ROI of relationship-building activities, events, and support programs. 

Some things to consider include:

  • Cost per advisor acquired through conferences vs. digital campaigns vs. referrals.
  • Revenue generated from advisors who attended training programs versus those who did not attend training programs.
  • Conversion rates from different marketing channels such as events, webinars, and one-on-one meetings.
  • Long-term value of advisors acquired through different channels.
  • Budget allocation effectiveness across relationship-building initiatives.

Continuously monitoring the advisor experience

The price of maintaining strong advisor relationships is paying constant attention to the details. Keep your eye on critical touchpoints like onboarding completion rates, time-to-first-trade metrics, platform usability scores, and how often advisors interact with technical support.

Your communication effectiveness metrics are just as important. Track which marketing materials and educational content resonate with your audience, monitor response quality and speed, and measure the success of your outreach efforts. Continuous monitoring helps you spot potential problems before they can damage relationships.

Get the right distribution partners

Partnering with distributors who excel at data and analytics can make all the difference in connecting your ETF with the right advisors and investors. 

VettaFi offers a full suite of behavioral analytics and digital distribution tools to help asset managers grow their products and their AUM.

 

Environmental, social, and governance (ESG) regulations are becoming more fragmented. Recent market and policy shifts have forced many asset managers to rethink their ESG integration strategies as they move forward.

For example, China is working to reduce its environmental impact. The EU has updated its taxonomy rules to do no harm while increasing sustainability. Meanwhile, the SEC has voted to end its defense of climate disclosure rules.

If you’re an asset manager, you might be wondering: How can you update your approach to ESG and better respond to increasing investor demands and scrutiny?

Below, we explore six failproof ESG integration strategies that will not only keep you on track but also put you ahead of the curve.

1. Analyze ESG factors to improve your investment strategies

Man looking at computer screen taking notes

Many asset managers are focusing on ESG factors by thinking critically about how they can affect their overall investment strategies. 

Why have ESG factors changed?

ESG factors had a brief moment in the sun shortly after the pandemic. Countries began taking climate change more seriously, and people started to question the shortcomings of the systems they had grown up with. 

But political backlash — and the backlash to that backlash — has since led to the fragmentation of ESG policies around the world.

Do investors still care about ESG?

Yes, investors still care about environmental, social, and governance factors. With so much political noise, it’s easy to overlook the significant impact ESG factors can have on investment performance. 

Thinking about ESG can help increase risk mitigation and improve client relationships. Clients are increasingly interested in investments that reflect their values, particularly younger investors who care about climate change and sustainability. They want their investments to align with their personal and ethical values. 

Why asset managers should analyze ESG factors

In the United States, where regulatory oversight is being abandoned, the responsibility is now on asset managers to improve their ESG integration strategies accurately.

With the increased focus on how ESG affects investments, asset managers have tremendous freedom to use unique investment approaches. 

Sound investment practices that consider ESG will lead to: 

  • Better Investment performance
  • Better risk management

  • Better client relationships

Ultimately, the integration of ESG factors and stewardship creates greater outcomes for asset managers and investors alike.

You might like: How advisors use model portfolios to balance scale and customization

2. Use ESG filters to build portfolios

Asset managers can set specific ESG parameters to define their investment universe. This helps them make stronger decisions about which companies to include.

Here’s how it works:

  • Define ESG criteria for screening: Develop parameters to filter potential investments before deeper analysis.
  • Set benchmarks: Identify companies that meet or exceed standards for environmental or social factors.
  • Flag problematic companies: Apply exclusions to any firms with a history of corporate governance issues.

Intensifying regulatory pressures

Stringent ESG regulations and political pressures worldwide are forcing asset managers to rethink their approach to ESG factors.

This creates a paradox. Even in countries that have pulled back from regulations, asset managers need to work harder than before.

That’s because without governmental bodies enforcing disclosure requirements, the responsibility falls to asset managers. They must proactively gather ESG data and incorporate it into their products.

Shifting from risk management to value creation

The ESG heyday of 2020-2022 focused heavily on risk mitigation. That argument still holds water.

Asset managers are starting to think bigger, using ESG factors to create value:

  • Moving beyond mandatory reporting requirements
  • Focusing on financial materiality
  • Understanding how ESG factors impact both risk and return
  • Using ESG data to inform better investment decisions
  • Incorporating ESG factors into valuation models
  • Building stronger portfolios

Shifting from risk management to value creation has led to real opportunities. Investors who successfully take advantage of ESG data can gain competitive advantages in portfolio construction and performance.

3. Environmental factors: rethinking the “E” in ESG strategy

Environmental issues are having a greater impact on investment strategies than ever before. 

Take hurricane tracking as an example. As the US limits its ability to track hurricanes, this creates new risks for investors seeking exposure to products or industries in hurricane-prone areas. Sustainable investments have also surged in importance in recent years. Asset managers must now factor in:

  • Climate regulations driving new environmental metrics

  • Investment shifts from carbon avoidance to actual climate solutions

From carbon credits to climate solutions

In the past, ESG investors often concentrated on carbon credits or companies that prioritized lower CO2 emissions. Today, investors want broader, more impactful solutions. 

China is a real-world example, using innovative approaches to tackle its energy demands. The country is exploring cold fusion technology while also expanding renewable capacity, adding 277 gigawatts of solar power output to its grid in 2024 alone.

Key environmental investment areas

When thinking about the “E” in ESG, asset managers should consider investing in companies and funds that care about:

  • Resource scarcity
  • Pollution
  • Reducing carbon emissions
  • Clean energy technologies and renewable energy
  • Becoming more environmentally responsible
  • Monitoring supply chain sustainability practices

Even in places where government-mandated reporting has become more relaxed, you can improve your reporting and transparency to attract investors who value clear, straightforward environmental commitments.

4. Social factors: rethinking the “S” in ESG integration

People protesting

Much like environmental factors, social factors impact both financial performance and credibility. Incorporating ESG principles for responsible investment ensures that financially material risks and opportunities receive proper due diligence. 

Asset managers should always consider social movements and geopolitical tensions when weighing social factors.

Social movements

Social movements have gained prominence in recent years. As people around the world express frustration with the status quo, new social ideas can emerge — for good or for ill. 

Asset managers need to keep their finger on the pulse of these trends. Companies that understand social movements outperform those that misread public sentiment.

Case in point: Target’s stock dropped 28% after bowing to anti-DEI pressures, while rival Costco took the opposite approach and saw a 51% surge.

Geopolitical tensions

Shifting global dynamics and increased geopolitical tensions have created market instability. This environment not only fuels social movements but also generates volatile market conditions.

Questions asset managers need to ask themselves:

  • What will the US trade wars mean long-term? 
  • Which countries will become tomorrow’s global leaders? 
  • How should geopolitical forecasts influence long-term strategies?
  • How can they position portfolios for success amid a changing world order?

Key social investment areas

When approaching the “S” in ESG, consider material ESG issues and invest in companies or funds that focus on:

  • Human rights, including diversity and inclusion
  • Product quality and safety
  • Labor standards
  • Geopolitical stability in both existing and emerging markets
  • How companies treat their employees
  • Community engagement, including supporting local charities and development initiatives

  • Product quality and safety

Read about: How to brand financial products (beyond just a logo)

5. Governance factors: rethinking the “G” is ESG integration

Strong corporate governance practices are essential for building trust with stakeholders, current investors, and potential investors. 

Asset managers must ensure they meet all expectations surrounding: 

  • Defined roles and responsibilities
  • Training and education programs
  • Transparent reporting standards 

Governance standards are tightening

The companies you invest in should understand that governance standards are tightening in response to high-profile corporate failures. 

As an asset manager, make sure you’re prioritizing companies with an increased focus on board diversity and executive compensation transparency.

Board diversity matters. Diverse boards consistently outperform homogenous ones. They represent broader experiences, leading to more dynamic thinking and better decision-making processes.

Key governance investment criteria

When evaluating the “G” in ESG, think about investing in companies and funds that:

  • Have qualified board members in place for proper oversight
  • Maintain transparency in their financial reporting
  • Maintain practices to prevent bribery and corruption
  • Comply with all laws and regulations, including environmental and social regulations

Asset managers must also evaluate the governance practices of their own partners and service providers. Consider working with providers who demonstrate active ownership principles and can support your investment analysis needs.

For example, VettaFi adheres to the IOSCO Principles for Financial Benchmarks. This is critical for index partners because it ensures your partnership is in line with your governance commitments.

With shifting regulations, due diligence must extend to your partners. A provider who adheres to strong governance principles builds integrity into your product's foundation, mitigating risk and reinforcing investor confidence from the ground up.

- Jack Eisenreich, Director of Index Product Development, TMX VettaFi

6. Maintain an ESG integration strategy for continuous improvement

Woman looking thoughtfully into the distance.

Real-time data is essential for proper ESG monitoring. Past compliance doesn’t guarantee future compliance. 

Asset managers must stay abreast of how companies are changing, which means leveraging real-time data and monitoring systems.

When regulations change overnight

Regulations are dynamic and can change dramatically without warning. When political power changes hands, policies often follow suit. 

Here’s how you can keep up:

  • Monitor regulatory shifts as they happen
  • Track how other firms react to changes
  • Adjust your strategies accordingly  

Why “set it and forget it” doesn’t work

Adding ESG considerations to your investment process is not enough. 

Asset managers must continuously monitor ESG-related developments. Best practices include:

  • Analyzing and assessing ESG metrics
  • Ensuring progress toward ESG goals 
  • Verifying their ESG performance meets or exceeds stakeholder expectations
  • Conducting in-depth reviews of material ESG factors across all asset classes, including fixed income

In addition to assessing how they’ve integrated their own ESG principles into the decision-making process, asset managers should conduct ongoing due diligence. Maintain ESG practices over time, keep pace with evolving regulations, and adhere to updated ESG principles.

The bottom line?

ESG integration requires active, ongoing management. 

Opening the window of opportunity

Right now, ESG regulations are all over the map. This presents an opportunity. 

Climate change, social movements, and government mandates are reshaping markets whether we like it or not. You can either get ahead of these forces or spend your time reacting to them.

While other asset managers pull back in response to environmental, social, and political uncertainty, you can build stronger ESG frameworks to help you gain ground and stay ahead. 

Asset managers who understand how to use ESG data integration will see real advantages in investment performance, client relationships, and risk management. Learn more about how VettaFi’s index services can build and strengthen your product set.

 

A new investment category has emerged at the crossroads of artificial intelligence and infrastructure, and it is attracting billions of dollars of investment capital

While there are many exchange-traded funds in the marketplace offering exposure to the theme of artificial intelligence, there is a rising need for a product that provides exposure to what Goldman Sachs labels “the next phase” of the artificial intelligence investment, AI infrastructure.1 Indeed, a new investment category has emerged at the crossroads of artificial intelligence and infrastructure, and it is attracting billions of dollars of investment capital. Some of the world’s largest investors are racing to fund the physical infrastructure required to power AI computations, from processors to data centers to power plants.2

While some of the early investment beneficiaries of generative AI adoption were software applications and semiconductor chip makers such as Nvidia, Goldman Sachs research predicts the next phase of the AI trade will be in AI Infrastructure. Goldman anticipates companies that stand to benefit from the buildout of AI-related infrastructure will include semiconductor designers and manufacturers, cloud providers, computer and network equipment makers, data center real estate investment trusts, utilities, and security software providers.3

Amid the boom in AI, computing power has emerged as one of the decade’s most critical resources, as servers run 24/7 around the globe processing the
models and applications underpinning AI. The energy, resources, and capital required to support the AI revolution are enormous. A report from private policy think tank RAND projects the world could need 68GW of extra energy capacity by 2027 to deal with AI growth, and 327GW by 2030.4 McKinsey & Company estimates that by 2030, data centers will demand nearly $7 trillion globally in electricity to meet the need for computing power.5

1 Goldman Sachs, AI infrastructure stocks are poised to be the next phase of investment, April 16, 2024.
2 Giacobone, Bianca. The rise of the AI infrastructure asset class, Latitude Media, December 10, 2024.
3 Goldman Sachs, AI infrastructure stocks are poised to be the next phase of investment, April 16, 2024.
4 Pilz, Konstantin, Yusuf Mahmood, Lennart Heim. AI’s Power Requirements Under Exponential Growth, RAND.org, January 28, 2025. https://www.rand.org/pubs/research_reports/RRA3572-1.html
5 Noffsinger, Jesse, Mark Patel, Pankaj Sachdeva, et al. The cost of compute : A $7 trillion race to scale data centers, April 28, 2025.

Financial advisors aim to grow their practices and serve more clients, but it can be challenging to do so without sacrificing quality. Thankfully, model portfolios offer a path forward.

Think of model portfolios as investment blueprints that advisors can customize to the needs of each client. They use them to scale their practice, streamline asset allocation, support clients’ investment goals, and improve distribution strategies — all while boosting profitability and simplifying the investment process. 

Here’s everything you need to know about the benefits of model portfolios for advisors, from key statistics to how to use them to balance scale and customization.

Why should financial advisors use model portfolios?

Creating a portfolio from scratch can feel overwhelming. Let’s look at how model portfolios offer a solution to this otherwise complex, intimidating process.

What is a model portfolio?

Model portfolios give financial advisors and financial services professionals a ready-made investment strategy that can be deployed to meet their clients’ goals. 

Typically, model portfolios include an array of investment products. These can include stocks, bonds, ETFs, index funds, mutual funds, real estate, and more. The diversification helps spread and minimize risk so investors can more easily meet their individual goals.

Benefits of model portfolios

Model portfolios have many benefits for advisors and their clients, including:

They simplify the investment process and provide a diverse range of investments. 

Putting together a balanced portfolio that meets investor needs requires a lot of overhead work. There are many factors to consider, but a good model portfolio has done that work in advance and created a turn-key solution for financial services professionals.

Rather than researching and vetting dozens of individual funds or securities across different markets, advisors can offer clients a curated mix of investments that work together as a complete portfolio. This would take considerable time to assemble independently, but model portfolios deliver it as a ready-made package.

They reduce the need for ongoing portfolio maintenance. 

Portfolios often require fine-tuning and adjustment. But most model portfolios come with built-in professional oversight, meaning investment teams monitor market conditions and make adjustments when needed.

When rebalancing is required, it happens systematically across all clients using that model, rather than requiring individual advisor attention for each account. This removes the burden of constantly tracking portfolio drift, timing rebalancing decisions, and executing trades.

They reduce the need to build a portfolio from scratch. 

Model portfolios eliminate most of the heavy lifting of building a portfolio because the most critical work is already done for you. Instead of spending hours determining investment objectives, researching asset allocations, and stock picking, bond picking, and mixing in the right ETFs or mutual funds, you start with a professionally constructed framework.

The portfolio structure, asset mix, and security selection have been handled by investment teams with institutional resources. You simply choose the model that aligns with your client’s risk tolerance and goals, then customize as needed. This means you can move from client consultation to implementation in a fraction of the time it would take to build everything from scratch.

They minimize risk. 

Because model portfolios err on the side of increased diversification, they minimize investment risk. A spread of assets, vehicles, and investment types means a collapse at any one corner of the market is unlikely to upend the investment.

This also gives advisors a defensible approach when the market is volatile. Rather than second-guessing individual choices, they can point to the systematic risk management and stress testing that went into the model’s construction — institutional-level analysis that most advisors lack the resources to conduct on their own. 

They provide a more cost-effective way to track performance. 

Because they are typically time tested and widely used, model portfolio performance is easier to track than a bespoke portfolio.  

Standardized models come with benchmarks and readily available performance data, eliminating the need for custom analysis tools or expensive third-party tracking services. Advisors can compare results against industry standards and explain performance drivers to clients without spending hours creating custom reports.

How model portfolios help balance scale and customization

Arguably the biggest draw for model portfolios is how they effectively balance scale and customization. Because they are designed to meet the needs of a large group of investors, model portfolios are an easy way to scale up a financial advisor’s practice.

Here are the benefits that financial advisors can expect when using model portfolios to balance scale and customize investment strategies for their clients.

1. Greater efficiency

Model portfolios automate the time-consuming work that typically bogs down advisors. Instead of manually tracking when portfolios drift out of balance or spending hours executing rebalancing trades across dozens of client accounts, the system handles these tasks automatically. 

Real-time updates mean advisors always have current information. When markets shift or adjustments are needed, the changes happen systematically across all relevant accounts. Advisors can serve more clients with less hands-on portfolio management, allowing their practice to grow without burning out.

Asset managers and advisors can lean on index partners such as VettaFi to help build model portfolios that can deliver customized investment strategies.

2. More flexibility

Model portfolios offer advisors flexibility, allowing them to adapt rather than stick to a rigid, one-size-fits-all approach. The customization options are extensive. Investment advisors can target allocations and incorporate or exclude certain sectors, emphasize income-generating investment strategies for retirees, or tailor client portfolios to meet specific client goals. 

Clients feel heard and understood when their values and goals are reflected in their long-term investments, leading to higher satisfaction and retention. Satisfied clients make referrals, helping advisors grow their practices. The ability to offer both professional-grade portfolio construction and customization gives advisors a competitive edge.

3. Simpler investment management

One of the chief benefits of model portfolios as an investment solution for investors is that they are easy to understand. They often clearly articulate what the investment goal is and the path that is being taken to meet that investment goal. This means advisors will be spending less of their time having to convince or explain to a client why they are making the investment decision they are.

Additionally, they eliminate the need to make a portfolio from scratch. Creating a portfolio is a complex task, and model portfolios eliminate a majority of that work.

4. Cost-effective account management

Outsourcing model portfolios and portfolio construction reduces operational costs compared to managing individual investments in-house.  The time, energy, and brain power that is spent on day-to-day management can instead be spent on unlocking other discoveries and prioritizing other objectives. This is good for the financial advisor and the client. 

Model portfolios can incorporate any investment strategy a client needs: index funds, active funds, ETFs, mutual funds, stocks, bonds, and more. They save on costs because they allow advisors to outsource daily account and investment management, so they can devote their time to developing their practice and building better client relationships.

5. Less risk

Investors ultimately want to protect and grow their principal investments. Model portfolios are designed to balance potential returns within each client’s risk tolerance, helping protect their principal while still creating opportunities for growth.

They allow advisors to leverage the expertise and talents of professionals who are adept at handling rebalancing based on current market conditions. Additionally, they are built for diversity of investments in multiple asset classes. This is essential in terms of protecting investments against market fluctuations, volatility, and macroeconomic surprises.

Key model portfolio statistics for financial professionals

According to Morningstar, investment professionals and advisory services are growing in popularity. As of March 31, 2025, model portfolios accounted for $626 billion in assets under advisement. This includes $38 billion in flows, which is a 62% increase since Morningstar’s 2023 report, which reported $23 billion in flows.

Blackrock is a big driver here. They remained the largest third-party model portfolio provider with $168 billion in assets under management. 

This kind of growth is important to keep in mind, especially given the recent surge in actively managed stock and bond ETFs in the last few years. Model portfolios are likely to begin incorporating that trend going forward. 44% of models reported at least one actively managed ETF in their holdings. 

Active ETFs offer some critical advantages in uncertain market environments, and tend to have lower expense ratios than mutual funds, along with the superior tax efficiency that comes as part and parcel of the ETF wrapper.

Looking for model portfolio solutions?

If you’ve been seeking a customized model portfolio, partnering with an index provider and partner like VettaFi could give you a serious advantage. Index providers have access to data and the ability to backtest. 

"Custom indexing implements a unique investment process or thesis, the same way an active manager does, but in a systematic way that allows for a backtest, yet is not dependent on a star manager,” said VettaFi Head of Index Product, Dalton Eastwood, CFA. “VettaFi has been building custom indexes for clients for over 10+ years. Most Advisors are not yet aware they could have a custom index built specific to their clients needs."

Reach out to our team now to learn more about customized indexes, data, and benchmarking support for your model portfolio.



Today, financial advisors have access to an extensive array of investment products to create precise portfolios for their clients. For asset managers, however, this creates a challenge. 

Breaking through the noise and reaching prospective advisors and investors is harder than ever. In this guide, we'll help you better connect with financial advisors.

Don't sacrifice long-term success for short-term wins

Aside from the challenge of standing out in a crowded field, asset managers are contending with product fee compression. Profit margins are being squeezed, and sales and marketing teams are increasingly pressured to prove their value and justify their spend. 

As such, we see marketing teams lean into  lower-funnel tactics at an accelerating rate and drop brand-building programs from their media mix. Why?

Lower-funnel measures can tie more easily and closely to sales, making reporting back to management on the results of marketing spend easier. 

Unfortunately, this can come at an expense over the long term. Marketers are trading success that compounds over time for easy, short-term wins today. Full-funnel approaches are critical to driving long-term success. Every stage of the funnel has a role to play in your media mix, and if designed correctly, they will work together to convert prospects into clients. Thus, asset managers should know some marketing tactics.

Once you realize the importance of the full funnel, the next step is optimizing your campaigns by leveraging data smartly and finding the right partnerships to continue your growth journey. 

 

In my storied career as a copyologist, I have noticed a few common pitfalls repeatedly made by novice or beginner copywriters. The astute among you might be thinking right now, “I bet he’s demonstrating some mistakes with this preamble.” No. I am not. Everything here is flawless.

Here are the common mistakes I see:

1. Your marketing copy is trying to explain everything

Like the first act of a mediocre screenplay, the most common mistake a copywriter can make is too much exposition. Far too often, when composing marketing emails for virtual events or website copy, writers feel the need to explain absolutely every nuance about the product.

Stop that.

There is a time and a place for a good old-fashioned deep dive. Case in point: This article is an explainer on an insights blog. I can spend 1,200+ words espousing copy wisdom. If this were an email, it would be booted straight to a spam folder.

Less is more. 

For example, if you want a friend to see the movie “There Will Be Blood,” what do you think will be more effective: 

  • Showing them a clip of Daniel Day-Lewis shouting, “I drink your milkshake.” 

  • Explaining to them directly that “There Will Be Blood” is a 2007 film from legendary director Paul Thomas Anderson, who is known for “Magnolia,” “Hard Eight,” “Inherent Vice,” and more. It centers on a ruthless, shrewd prospector who pivots from precious metals to oil after stumbling across a large oil field. He tricks local landowners into selling seemingly barren land to build his empire. The film’s themes center around greed, obsession, family, and pride.”

Your audience doesn’t need to know all the context; they simply need to be compelled. Show me the electric performance and even though I don’t know anything else about the film, I’m in. Explain the plot and the themes, and I fall asleep. And no, it's not the narcolepsy or the extremely late night filled with too much rose and not enough water. 

2. You are not thinking about your audience when you compose marketing copy

Related to the above, when we’re in our head and have a cool idea, we are fundamentally in a different place than an audience. We are excited to share something that we understand inside and out.

People are exhausted; thus the people you are writing for are exhausted. They work too hard, they have complex family situations, they are getting spam called every other hour, and, to top it all off, a firehose of useless emails are flooding their work inbox, their personal inbox, and their old personal inbox that they keep meaning to go through but never find the time. Have you ever done laundry? Have you ever noticed that no matter how often you do it, you still need to do it? 

Managing day-to-day existence is brutal. 

The last thing anyone has the bandwidth to do is absorb a granular explanation of the topics you will cover in your upcoming virtual event about the importance of grain futures. 

Copy is an invitation. You need to be brief. It is the marketing equivalent of a friend saying, “Hey bud, we’re going to hit [your local bar’s name here] and grab some drinks if you want to join us. No pressure.” 

It should not be “Hey man, I’m going to head to [your local bar’s name here] with [a long list of friends and people you don’t know.] Gary has been really struggling with his recent divorce and could likely use some company. In particular, he could use someone to just sort of let him talk about Warhammer miniatures, which he’s really gotten into ever since Cindy left him. For reference, Gary is currently using Orks but he’s Skaven-curious.”

All of that other information might be pertinent and true, but it doesn’t have to be explained in the invite. Your exhausted friend receiving a friendly, “Here’s what we’re doing if you want to join us” will be a lot more likely to opt in than the same friend getting the invite burdened with overwhelmingly niche information.

Understanding what your audience has bandwidth for and trusting them to connect the dots will open up possibilities. If you assume your audience wants nothing more than to read your words, you’ve already lost them. If you don’t trust them to follow along or fill in the blanks, they’ll feel talked down to.

You might be interested in 7 ETF marketing tactics to attract investors.

3. Your word choices and sentence structures are repetitive 

Sometimes, just to get some copy on paper, you write messy. You use the word “messy” in two sentences in a row, like I just did. Don’t do that. There are so many words. Too many, really. Pick a different one. Be ruthlessly precise.

The same goes for sentence structure. SEO best practices have made many copywriters prioritize short sentences. Variety is better. You don’t want your readers to get bored, and changing up your rhythm can help keep your writing electric and unpredictable.

Back in the aughts, I attended an acting class led by legendary theatre actor Yoshi Oida. For one of the exercises, he made everyone individually enter a room, pick up a knife, and then exit the room. You were not allowed to “decorate” the performance via emoting or saying anything. You had to maintain a neutral expression. The only tool you had to tell a story was the rhythm of how you performed these actions. And that is more than enough! 

If you simply walk in the room, pick up the object and leave, that’s vague. But if you enter and then stare at the knife for a long time before slowly picking it up … and then suddenly, rapidly exiting, well, heck yeah, now we got a story! The audience starts filling in the blanks.The rhythm of the action engages the audience's imagination. When people are actively thinking about what they’re seeing, they’re invested. 

Copy works the same way.

4. You aren’t editing or iterating enough

This is a big one. When we get an idea we like, we are prone to committing when we should be iterating. Part of this is excitement. When we feel good about something, we want it to be seen and we want to be recognized for having thought of it. But ideas are not the finished product. They are a prototype, a version 0.1. The best thing you can do is get it into the hands of a few people and get useful, actionable edits. Even sitting on something for a bit and then reapproaching it in the future can be helpful. There’s a reason feature films have rough cuts and video games have early access builds. 

If you like the way your “perfect” idea works, do something completely different. Give yourself multiple angles of attack for a single piece of copy. You might have stumbled onto the best option right away, but more often than not, iterating and listing five or six options will lead to something better. Even if it doesn’t, and you come back to that original idea, the work is never wasted. It could:

  • Help you better understand what makes your first idea exceptional
  • Be repurposed as part of a different campaign or project down the road

  • Keep your mind sharp, flexible, and open to new discoveries

A core part of this is actively embracing change at any time. This will be your superpower because lots of writers, even copywriters, can feel personally attacked when they receive a note. A note is an opportunity. 

Notes sometimes come in because a client or supervisor wants something different and better, but they also sometimes come in because you are on to something and aren’t quite there yet. Don’t judge the note or assume the note is a judgement passed on you. Embrace the opportunity to iterate and try something new or edit and punch up what you have. 

Final thoughts

There’s more to copy than most writers assume, and there are a lot of trends and bad advice out there. But you will find success if you:

  • Minimize exposition.
  • Consider your audience and the medium
  • Vary your words, sentence structures, and flow.
  • Edit and iterate at every opportunity

If you are looking for marketing and distribution support, check out VettaFi’s digital marketing services. Our experts will partner with you to create compelling content, display ads, virtual event emails, and more.

In his monthly column, CMO Views, VettaFi’s CMO Jon Fee connects with other CMOs to discuss how they drive success inside and outside their organizations, sharing perspectives on career, outlook, and motivation. For this edition, Fee sits down with Farnaz Maters of Principal Financial Group®.

The role of the chief marketing officer has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise, with responsibilities that span pipeline, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product.

Farnaz Maters has an MBA from the Wharton School and worked her way up as an analyst to an executive director at JPMorgan. In her role as VP and CMO of Principal®, Retirement and Income Solutions, she focuses on promoting the tightly hewn connection between marketing and business strategies to raise awareness of Principal’s retirement services. Centering digital- and data-driven precision in client interactions, she manages campaigns, product and segment marketing and communications, explores digital and business analytics, and produces proprietary research and thought leadership.

Farnaz Maters on Career

Jon Fee: Let’s start with the jobs and careers. What do you think the difference is between a job and a career?

Farnaz Maters: This is something I actually talk about with people who are entering the workforce. I view a job as something you’re viewing as your paycheck. You’re clocking in and then clocking out. A career is something you’re actually finding fulfillment in and enjoyment from.

I’ve been really lucky in that, since I’ve entered the workforce, I’ve been passionate about the jobs I’ve had. I get fulfillment from my work. I’m someone who’s really motivated by learning, and my career provides that personal fulfillment. The way I view it is if you’re getting fulfillment – and fulfillment can come in variety of ways – then you have found a career you invest in it, versus a job that’s more transactional.

Fee: That’s an excellent answer and makes a lot of sense. Why don’t you tell us a little bit about your first job? You said you’ve been fortunate to have, throughout your work career, jobs where you are getting fulfillment.

Maters: My first job was in retail. It was at a department store, and I was the holiday help. I was the person behind the counter providing the department store’s free service of packaging customers’ holiday gifts. All day, I was putting items in boxes, gift wrapping them beautifully, and adding bows.

Finding the Joy in Every Job

Fee: How about the first one that felt like the career? Or was there actually the fulfillment in even that initial holiday retail job?

Maters: Even with that, it’s joyful, right? It’s the holiday season! People are generally happy. I acquired the skill set of learning how to beautifully wrap a gift. I’ve been able to lean on that skill. So I don’t shy away or dread having to gift-wrap things when it comes to birthdays or holidays.

When I was in college, I really thought I wanted to go into law. So I took the LSAT and completed all of my law school applications. Being the nerd that I am, I even decided to go through the interview process just to see what it was like and to practice for when companies come on campus.

I went through the process of applying to law school and applying for jobs at the same time and I got a job offer at JPMorgan. It was a two-year rotational program at the bank — this is before all those mergers. I knew nothing about asset management, banking, or financial services, but it sounded interesting. I thought, “My LSAT scores are going to still be good, my applications and my essays, everything is still going to be good. So I’m going to do this two-year thing. Then I’m going to go back and go to law school because I’ve done all the work and heavy lifting to prepare.”

And then I started at JPMorgan. I was a finance major, but I did accounting internships. I didn’t really have a good understanding of all the roles, all the things you do in financial services. My second rotation was in asset management, and I just fell in love. I loved everything about it. That spurred my passion and I think really started my career in financial services.

Fee: That’s a neat story and it has me wondering — what was your first job in marketing specifically?

Maters: I didn’t move into marketing until midway in my career. After the rotational program, I went into the sales organization as a sales associate doing support work. I then progressed to having my own territory, and then into being a sales leader. Along the way, I decided to go to business school.

When I was in school, because I’d already had my degree in finance, I was like, “I’m just going to take classes and look for experiences that are really intellectually stimulating and interesting.” I gravitated towards all the marketing classes, and I ended up fulfilling my concentration for my MBA in marketing strategy.

So, I get my MBA while I’m working and I’m trying to figure out the next step in my career. I’m networking, seeking input from key mentors that I really respect. One suggested making the shift into marketing. They thought my experience with clients and understanding the products would really add a lot of value to the marketing organization.

It was a really scary thought for me. For years, having revenue tied to my name and to my function, to then moving into this nebulous area. But you know what? I made the move, and I was surrounded by some really exceptional marketers — true marketers that had come from CPG and from branding agencies.

I rolled up my sleeves and was a practical student in acquiring some of those marketing skills I didn’t get to practice with my MBA or have exposure to as a salesperson or sales leader.

Changes in Marketing

Fee: How has marketing changed since you first entered the field midway in your career? How would you define it as a CMO today?

Maters: In financial services, we’ve been behind in our definition of marketing versus other industries. But I think over the last five to 10 years, financial services organizations have realized the true power of marketing and a new way to define it. They now better understand the value it can add. Early in my career, and even when I initially made my shift into marketing, it was viewed as sales support. One of the things that was really interesting and innovative when I made the shift into marketing was that the organization believed in the true power of marketing. They were bringing in key talent across digital branding, activation, and social. So there’s an influx of really talented people coming from CPG and other industries to elevate that marketing function and to deliver the value that marketing should be delivering to the business.

I’m really lucky that I’ve been part of organizations that don’t have a narrow view of what marketing is. They truly believe in the power of it as a growth driver. It’s integrated in everything we’re doing. It’s not a different part of the business. Marketing is the business.

Pets and Pet Peeves

Fee: I love that answer. Marketing is the business — you are absolutely right. The next section is my pets and pet peeves section. To kick that off, let’s talk pets. Do you have any?

Maters: I don’t have any pets. I have never been successful in keeping a plant alive. So I’ve never ventured into pets. With half my career being in sales, I traveled so much that I’m only responsible for keeping myself and my son alive. It’s just not something that my husband and I have ventured into — the pets or plants world. There are no plants inside our house.

Fee: Totally makes sense. Surely you have cultivated some pet peeves though?

Maters: Whenever I’ve moved into a new team, working with new people, I really try to outline some of those pet peeves so I’m transparent. It helps interactions go a little bit smoother. One of them is meeting culture.

Fee: Oh, absolutely!

Maters: For so many of us, our calendars are just jammed with meetings! And I really push back and encourage my team to do the same. If you’re in a meeting, and you don’t know what your role is or what you’re contributing and there’s nothing specific you’re supposed to be taking away, I’m not sure you should be in that meeting.

The other tactic I use to gauge if I should be in the meeting is if I’m multitasking. If I am, it’s either a really bad meeting or it’s not a meeting that’s important enough for me to be attending. Or it’s a disorganized meeting.

I have a lot of pet peeves around meeting culture. One of our most scarce resources is time. I want to be stingy with my time. I ask people to have the agenda and get me the materials before the meeting. If I look and there’s not an agenda or materials, I cancel the meeting, because the onus is on me to come prepared. I need to have looked at the agenda, I need to have looked at the materials, so when we get into the meeting, we actually have the discussion points and we make the decisions we need to make.

A lot of my pet peeves are around being prepared for meetings — how you show up, and what the expectations are.

More Meeting Culture Pet Peeves

Fee: You’re speaking to my heart here. Sometimes I’m in a meeting and I look at all the people and I started thinking, “What is everybody’s salary? What is everybody making per hour? How much is it costing the company for this meeting to happen?”

Maters: Yes! I think the other thing about meeting culture is herds. Do you really need five people? Do you need three people from the same team in the meeting? If I have accountability, if I’m the person representing the group or the function, it’s my job to take information and bring it back to the group. If people are doing that, you don’t need two or three people from the same team. I’m sorry, I’m really passionate about this pet peeve. [Laughs.]

Maters on Leadership

Fee: I’m 100% with you. But it’s time to pivot to a new topic: leadership. What daily habits or weekly routines do you keep that keep you sharp as a leader and evolving as a marketer?

Maters: Especially as you expand your responsibilities, it’s easy to get distracted or pulled into a lot of different directions. For me, before I come into work (on my drive in or in my preparation to start the work), I have my top one or two things I have to get done that day. It’s not 10. Ten would be amazing. But I know that if I really focus my energy and say, “This is the one thing that has got to get done today,” or “These two things are essential,” it helps me be more effective. I try not to do more than two.

Looking at the other part of the question, well before COVID, I had seven direct reports. Out of the seven, only one of them was in the same location as me. Also, only 40% of my team was in the same location. Sixty percent were either remote in a work-from-home situation or they were in a satellite office.

So one of the things I started doing was casual coffees. There wasn’t actually coffee, it was virtual. Again, this is well before COVID. It brought my team together in a more casual setting. It breaks up your day. You can engage and interact with people and build more of a community and a team dynamic. Especially as you get larger teams that you’re responsible for, it’s harder to make those personal connections. It’s something I’ve done for the last six years. I get a lot of fulfillment out of it.

In those meetings, we talk about questions people have for me about changes coming in the organization strategy. But mostly it’s fun, uplifting topics. When it comes to the team, there are only so many people you interact with on a daily basis. It has allowed me to be better connected with my team. And it’s allowed them to make connections outside of the people they work with on a daily basis.

Maters on Mentoring

Fee: I love that. I think that’s terrific. Mentoring in marketing is particularly unique and challenging because this is a rapidly evolving discipline. Who helped you get where you are today? And do you have someone you’re mentoring?

Maters:  Yes. And I think, for me, the most critical period of mentoring was when I made the career shift and moved into marketing. I had some of the technical learning, some of the strategy work that I was able to do as part of the MBA. But I didn’t have that hands-on practical experience.

I came with knowledge about the customer, knowledge about the business and the products, and peripheral knowledge of marketing. I was paired with two people when I first started in marketing. One came from the agency/branding world, and one came from a digital activation world. They didn’t have the client or the business background, they were true marketers. The three of us formed a team and tackled big initiatives while relying on each of our strengths. To this day, I credit the two of them with the amount of knowledge I was able to acquire from mentorship. They just had expertise and knowledge that I didn’t have. I had knowledge and expertise they didn’t have. It was it was an amazing way to do that, and I’ve tried to replicate that as I’ve built teams. You acquire talent to augment the knowledge and experiences of your team. Having the ability to pair people, to lean into their areas of expertise, and to upskill people is really foundational to evolving the marketing organization.

Fee: I really love that, because with this question, we traditionally hear a lot about a more classic dynamic of somebody in a higher position. I think peer-to-peer learning is probably something that happens in every field all the time. One of my early jobs was as a server, and I learned how to be a server from the other servers, not from that manager at the shop.

Maters: I think an element of it is being open and vulnerable. To know what you don’t know and being open to leaning into people who have that expertise, because that’s the way you’re going to learn.

Continuous Improvement

Fee: Totally makes sense. Terrific answer. Up next, let’s talk about digital transformation. How do you define digital transformation without using the word “digital” or “transformation?”

Maters: I have a way I describe it – it’s continuous improvement.

Because “digital transformation” makes it seem like you’re transforming, and then you’re done, right? To me, it’s about continuous evolution and enhancement.

As organizations, there are things we need to modernize. We need to leverage new technology and new ways of working. But once that initiative is done, you can’t check the box and say, “OK, we’ve transformed.”

I think if you treat it that way, you wake up and you’ve got another big transformation to do. I think it’s a shift in mindset to continuous improvement. You have to be acquiring the new technology, the new processes, the new ways of working so you’re making incremental investments throughout the way. Realizing those steady benefits versus another big initiative is critical. I’m not discounting that you need some of those big initiatives from time to time. But I am a big proponent of shifting that mindset so it’s not some behemoth digital transformation.

Innovation in Marketing and Technology

Fee: Super interesting! What is something that nobody’s thinking about in terms of digital transformation, but that you’re keenly aware of?

Maters: I don’t think it’s about that. I’m focused on what’s going to have the impact on the business and how you’re going to operationalize it, so it’s woven into your procedures, how you’re actually operating. To me, there are a lot of things that are innovative and exciting happening in marketing and in technology. But it’s important to have line of sight and know how it’s going to impact you today or in the future. Being practical about what’s going to actually move the needle for your organization versus getting distracted by some of the shiny new tools or the things creating buzz.

I’ve seen a lot of work put into data, AI, and machine learning. There’s a lot of innovation being done in those spaces, and it’s super exciting. But how much of it is actually getting integrated? You do all this work, you develop a model. But is that model being woven into and changing your business process? Is it changing the way you do your activation?

For me, it’s about making sure you understand the new trends, the new technology, and the innovations happening in the industry and in peripheral industries. But thinking about and focusing the organization on what’s going to have the biggest impact and having confidence it’s going to actually get operationalized is key.

The Crystal Ball

Fee: This all makes a lot of sense. Let’s look into the crystal ball now. Tell me about your predictions for marketing and marketers. What’s coming next, and how do we prepare?

Maters: I think about what’s happening from a regulation perspective in the standards around privacy and data. I think it’s going to be really important in our industry (and because we’re a global organization), to address customer expectations about their data and how it’s used from a marketing and targeting perspective.

The second part of this is data utilization. At Principal, we’ve been the beneficiary of a lot of innovation around data that helps us better target and drive engagement. I think that’s going to continue. I always look at CPG and what they’re doing in terms of evolution and the tactics they’re using. We’re a little bit slower in financial services. I think we’ve got a lot of leeway in taking some of the marketing best practices from outside our industry, such as targeting and data utilization.

Then I think a third one is generative AI, and what it’s able to do. I think if you’ve played around with the technology, it helps with your starting point. Then you can really elevate it with the talent and expertise on your team. AI will be able to automate some of the tasks that are a little bit more mundane or focused on the earlier part of the marketing process.

Parting Gift

Fee: Thank you so much for your time. One last question. Or, I suppose, offering. I like to have people leave a parting gift for the readers. Can you share with us an album, book, movie, TV series, or other creative work that brings you joy right now? And what is it about this creative work that fires you up?

Maters I’m going to give you two answers. I always joke with people that if you look at my Netflix history you would think that I’m a teenager or a 35-year-old male. I go towards the cheese of a teenager, or the sports of a 35-year-old male.

One of the things that I’ve loved is Drive to Survive, the Formula One documentary. I actually wake up at early hours to watch live Formula One races now! On a nightly basis, I Google “Formula One News” because I’m really invested in it. I love the sports documentary show aspect of it, but now I’m into the sport as well. The reason I love it is the precision, the craft of what they’re doing. The milliseconds matter and everything’s got to go right. How they work as a team, the competitive nature of it — all of that is really exciting to me and I love every aspect of it.

I’ll switch gears. The other thing I’m really into was the Barbie movie. In the middle of the movie, I actually ordered the “Kenough” sweatshirt. If you know me, I wear white, black, and navy … and that’s it. This sweatshirt is neon colors and it’s fluffy. In the middle of the movie, I took out my phone and ordered it.

I’m waiting for someone to dissect, from a marketing standpoint, the feat that the Barbie movie accomplished. It is absolutely amazing. I’m in awe of the marketers behind it, the integration that they’ve accomplished. It’s amazing.

Insurance products and plan administrative services provided through Principal Life Insurance Company®, a member of the Principal Financial Group®, Des Moines, IA 50392.

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This article was originally published on ETF Trends on November 8th, 2023.

In this edition, VettaFi CMO Jon Fee sits down with Vanilla CMO Jim Sinai.

The role of the chief marketing officer (CMO) has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise, with responsibilities that span pipe, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product. 

Jim Sinai is a seasoned cloud executive and experienced marketer, with a background in sales and business development. He is passionate about new technology, telling the story, and helping make complex software easy to understand.

Jim Sinai on Jobs & Careers

Jon Fee: What do you think is the difference between a job and a career? 

Jim Sinai: A job is what you do in a moment or period. A career is the portfolio of jobs that defines your identity. I started in software in customer service, moved into sales, and have spent the last decade in marketing. So I think I will probably look at my career as a software executive more than the job or role I held. I also am a big believer that we live our lives in chapters. Chapter one was service and sales. Chapter two was marketing. I’m curious what chapter three will be.

Fee: Well, tell us a bit about the prelude to chapter one! What was your first job?

Sinai: My first job in high school and summers in college was working on a construction job site as a laborer. My first job out of college was in a call center at Bloomberg. While these may seem very different, there was a common theme – both roles were manic about customer service. My job every day in construction was to make sure the homeowner/client’s house was dust-free and they felt that the construction project was minimally disruptive. And at Bloomberg, it was grounded in what customer service at scale needs to look like.

Fee: That’s really interesting! What was your first job in marketing and what’s something you learned from an earlier job you had outside of marketing that impacts your approach to marketing?  

Sinai: My first marketing role was as a product marketing manager on a small business unit at Salesforce in 2011. There are two things that really made me successful in product marketing. The first was that I came from sales so I always looked at my marketing through the lens of “would i say this in a customer meeting?” The second was that I really wanted to be a product manager for a period. This allowed me to really lean into the product side of the role and understand how software is built. Both of these perspectives have continued to inform how I approach marketing in my role at Vanilla, where we’re reinventing the estate planning experience by building beautifully designed products that make the complex simple.

Fee: Tell me about how marketing was defined when you first entered the field vs how you as a CMO define it today?  

Sinai: Since I started in marketing, there’s been an explosion of technology and data, creating a more data driven approach to marketing. But lately, the amount of data and systems are starting to be too much for an organization to really leverage. AI is most definitely going to make managing data easier. Lately, I’m noticing a trend of the best marketing organizations returning to the power of storytelling and brand to build and maintain their differentiation. So, while the tools and channels might change, the core focus of great marketing – be something special to someone – is not going change.

Jim Sinai on Pets and Pet Peeves

Fee: Do you have pets? What about Pet Peeves? What annoys you the most in the workplace?  

Sinai: Three kids keep us plenty busy so we are going to wait a beat before adding a fourth “kid” to the mix. My wife is a veterinarian so she gets the rest of her dog fix at work.

But I do have a few pet peeves. I really get annoyed when someone calls a meeting and doesn’t come prepared to drive the conversation. I’m not saying you need to have a full deck, but you should be driving the conversation and making sure it’s outcome oriented. Second, I think a lot of people forget to set context for executives. We’re all busy so it’s important to start with 30 seconds of “why are we here” and “what decision do we need to make?”

Leadership and Work Habits

Fee: What’s the one thing you can point to (a book, an experience, a person) that has played the greatest role in shaping your leadership style?

Sinai: Early on in my career I learned about the Nordstrom organization chart, which is upside-down. It’s the CEO’s job to support the management team and the manager’s job to support the associates in the store. That has always resonated with me and how I approach leadership. The marketer in me loves the book “The Power of Moments” by Chip and Dan Heath. They point out how to create lasting impressions with people by wow-ing them when their brain is primed to take inputs

Digital Transformation

Fee: One of my favorite questions to ask other CMOs – define digital transformation without using the word digital or transformation.  

Sinai: Is it cheating if you use a foreign word? Kaizen is the Japanese word or term for continuous improvement. Most every organization practices kaizen to some degree, albeit some slower than others. And continuously improving is about adopting both proven and innovative practices from other industries to better serve your customers and employees. As long as everyone can agree the status quo isn’t sufficient, we’ll all continue to get better!

Giving Back

Fee: Tell me about your volunteerism and giving back to make a greater impact?  

Sinai: I love to volunteer when I can. Truth be told, it comes in waves and right now I’m in a trough, mainly due to intense family commitments. In the past I’ve spent time as a youth mentor or tutoring in schools. But right now, I’m spending time coaching young kids on the soccer and baseball field. Everytime I lean in, I remember that giving back is one of the best ways to create happiness and joy.

Careerwise, I know I always prefer to be working on a product that has an element of giving back. At Bloomberg and Salesforce, employees were measured on volunteering. At Procore, our platform was improving how folks on the jobsite worked and we delivered countless dollars and hours of free training and products to university students. And now at Vanilla, we are working on how to simplify estate planning, first for the advisor community, but ultimately to make it more accessible to everyone.

Fee: Have you ever been on the receiving end of giving, and how did it impact you? 

Sinai: Every role I’ve gotten, from admission to a school or a job offer, has come because of mentorship and network. I’m super indebted to folks who gave me time and the opportunity. So I take it as a mission to make sure to help the folks coming up find their way to their opportunities.

Looking into the Crystal Ball with Jim Sinai

Fee: Tell me about your predictions for marketing and marketers? What’s coming next? How do we prepare?

Sinai: I think we’ve seen just the tip of the iceberg on generative AI so I’m loath to predict what the future holds. One thing I can say for sure is that it’s going to be easier and easier to generate content which means that while more marketing teams can focus on creating more content, it’s going to require more work to cut through the noise. I’m also curious to see how search changes when we get to more conversational user interfaces.

Jim Sinai’s Parting Gift

Fee: Can you share with us an album, book, movie, TV series, or other creative work that brings you joy right now? What is it about this creative work that fires you up? 

Sinai: I’m in the middle of Shantaram. It’s about an Australian escaped-convict hiding in India. It’s a long read, but I’m enjoying getting a peek into a culture I know little about.

And let’s also just admit that Netflix’s Drive to Survive was the world’s best marketing stunt. I am shocked to admit I’m now an F1 fan.

To stay connected to Jim, you can follow him on LinkedIn. 

This article was originally published October 10th, 2023 on ETF Trends.

 

In this edition, VettaFi CMO Jon Fee sits down with Broadridge CMO Dipti Kachru. The role of the chief marketing officer (CMO) has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise. Their responsibilities span pipeline, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product.

Dipti Kachru has a proven record of leading multi-disciplinary marketing teams in launching new businesses, designing integrated go-to-market strategies that shape brands and deliver on sales goals, and instilling a culture of excellence, innovation, and flawless execution. Prior to Broadridge, Kachru was the CMO at J.P. Morgan Wealth Management and the affluent business at Chase. She also spent many years in asset management at J.P. Morgan and OppenheimerFunds, and is a Columbia University graduate.

Jon Fee: I like to kick things off by talking about jobs. What is your dream job? Aside from being a CMO, of course.

Dipti Kachru: Don’t ask me whether CMO of Broadridge is or is not my dream job. That’ I refuse to answer. I plead the fifth.

Fee: [Laughing] We’ll leave CMO out of it.

Kachru: You don’t have to because the reality is that being a CMO is the closest I have been to having a dream job. I love how it brings together art, science, data, and technology to solve business problems.

I think the other ingredients of any dream job for me is working with scale and complexity. I love looking at the world from different perspectives. I love building and I love problem-solving! But it’s not just about the process. At the end of the day, for me the essential ingredient of a dream job is being able to have impact – business growth, a stronger marketing function, a more fulfilled team.

Dipti Kachru On Her First Marketing Job

Fee: Awesome. What was your first job in marketing?

Kachru: My first job in marketing was working for a promotional marketing agency in India at a time when the Indian economy was opening up to global brands. This was the early days of digital where Marketing primarily entailed traditional advertising or “below-the-line” promotional and event marketing. This is where I really learnt what it meant to be a marketer – understanding the business strategy, learning how to soak in customer insight, how various channels of marketing drove different outcomes. It was an incredible training ground. We were a start-up agency and so I got to wear multiple hats from operations to strategy and worked on some of the best brand in the world helping them re-orient their marketing strategy to a vibrant market like India.

Pets and Pet Peeves

Fee: The next question is do you have any pets? What are your pet peeves?

Kachru: No pets, but I do have two kids who keep me on my toes. That said, my daughter is actively petitioning, more like harassing, us for a dog.

When it comes to pet peeves it’s usually about specific work cultures & mindsets. For e.g. work cultures that don’t embrace a growth mindset — where people think they already have all the answers – and rely too much on past performance versus being more open to outside in thinking.

The second pet peeve is selfish, self-promotional attitudes. I am really big on operating as tribe where it’s about aligning around a purpose larger than any one person’s role or agenda. We only win when we win as a team – so the egos need to have to be left at the door.

Jon Fee: Yeah, that makes a lot of sense. We’re definitely, I think, at a place in the world where it matters to have an idea of where we’re going collectively. I think that’s a really smart answer. What’s one thing you can point to – and this can be a book, it could be a person, it could be any experience you have had – that has played the greatest role in shaping your leadership style?

Kachru: I don’t know if there’s one thing. I truly believe that I’m the sum of my experiences and I continue to evolve based on those experiences.

I try to be a sponge, and learn from everything I read and listen to. I particularly enjoy podcasts featuring CMOs as you get to hear their thinking and how they are building world-class teams and cultures while strengthening the role of marketing in the business.

As for people who have influenced me, I have been lucky to work at some amazing organizations with a talent bench of leaders, especially some incredible female leaders. One of the most talented CMOs I know, who is now CEO of a wealth management business, really helped me broaden my thinking on the role of marketing beyond the traditional lines – and to see it as business strategy and growth function.

I have learned the most by seeing leaders in action. One who had a meaningful impact on me was Thasunda Duckett, currently the CEO of TIAA, who showed me the power of empathy and inclusion in galvanizing teams and rallying around a purpose.

Dipti Kachru On the Rare CMO to CEO Career Path

Jon Fee: Why do you think the CMO to CEO pivot is rarer than maybe some of the other C-suite pivots? And do you think that that is maybe a lost opportunity?

Kachru: It’s an absolute lost opportunity. The data tells you that very few CMOs end up being CEOs. CEOs tend to come from finance, business or sales. And this is because traditionally, the role of marketing was designed around brand building, storytelling, and sales enablement — they weren’t seen as a proven lever of growth. But with modern marketing and improved use and data and technology, that is changing.

B2C organizations for years have recognized marketing a growth driver. B2B is still getting there. There is growing recognition now of the CMO beyond the classical MarComm function or the customer advocate, rather a leader uniquely suited to connect product, sales, finance, technology and business strategy and orchestrate a more coordinate go-to-market to help drive growth.  I think this acknowledgment and proven track record of the modern CMO will help set them up more CEO roles.

Jon Fee: I always think it’s interesting how marketing runs through an entire organization. You can’t tell the story without knowing the character, right?

Kachru: Indeed. And by understanding the role of the character today and in the future – you can establish a vision and value proposition that can be sustained.

Digital Transformation

Jon Fee: That makes a lot of sense, and in speaking of how you get there and where the setting of this story now occurs. More than ever, it’s digital. So, we’re going to go on to the next topic, which is digital transformation. Can you define digital transformation without using the word ‘digital’ or ‘transformation.’

Kachru: For me, it’s about better serving your customers where they are, and how they want to be served. That’s the heart of it. Digital is an enabler; transformation is a necessity of evolution. But at the heart of it, it’s about meeting and ideally exceeding customer expectations.

Kachru Peers Into the Crystal Ball

Jon Fee: Makes a ton of sense to me. Let’s do the dangerous question now and dip into the crystal ball. And you will be held totally to account if you’re right or wrong here. So be ready for that, the people in the future will look back on this interview.

Kachru: [Laughs.] For context, this interview won’t be published for a few months, so I’m predicting the future from a point in the past.

Jon Fee: So what is your prediction for marketing and marketers? What’s coming next in the one to five years out range? What’s going to be the next big thing that we all must be wrapping our brains around?

Kachru: As I have mentioned in this conversation, I truly believe that the role of marketing will evolve, more universally, to be that of a growth driver. That’s my prediction. The Marketer will continue to have a growing voice at the table especially when brands and organizations are trying to find and hold on to their differentiation in a rapidly evolving marketplace.

Marketers were always recognized for their contribution to building brands, amplifying messages, and being a customer advocate. But with better access to data and analytics, marketing can prove their value – show real revenue attribution for their efforts. Similarly, our ability to orchestrate targeted digital experiences give us a greater role in driving the sales process and delivering measurable outcomes. This clarity in our contribution will unlock an appetite to invest more in marketing – which is needed especially when it comes to data and tech infrastructure. I am excited about this dynamic and this maturity in the role of the marketer as critical in driving business growth. By the way, this also means that as marketers, we need to work hard to deliver on this promise.

The Art of the Story

Jon Fee: I would love to hear your thoughts about why brands story matter and what brands do that they usually get wrong in terms of how they present their story?

Kachru: Well, that’s a loaded question. Why do brand stories matter? I think as human beings, whether you’re a B2C or B2B brand, you’re still selling to human beings. And purchase behavior isn’t just rational – emotional association with the brand often tips the scale, especially when the products are largely undifferentiated. At the end of the day, it’s about establishing a strong relationship with the customer – and this is where authentic brand stories come in. It’s how consumers understand the brand, its purpose, and its promise.

What do brands get wrong? I see two things often – One, companies get caught up in the opinions of senior leaders vs. deeply listening and incorporating the customer insight. The core elements of their brand and story are shaped by individual reactions and opinions, and the real customer insight gets lost.

The second is brands that tend to hold on to the past glory and miss the opportunity to evolve with their customers. Stories need to be authentic, but its form and distribution channel needs to change. Static brands tend to fade away and brands that deeply understand who they are but can evolve their narrative with the evolution of the landscape, I think, tend to succeed.

Parting Gift

Jon Fee: That’s a really smart answer. I like that a lot. For the final one, we’re just going to do a parting gift. Can you share with us an album, book, movie, TV series, podcast, or other creative work that brings you joy right now? And what is it about this creative work that fires you up?

Kachru: What I love about marketing is this mix of emotional and rational …art and science. And that is often reflected in what I tend to read or listen. I try and feed both sides of the brain. For me, the rational is often listening to CMO podcasts, because they offer very real insights and advice on how they approach real challenges and how they drive outcome. I find the thinking and ideas very inspiring, and it make me feel less alone in my mission.

On the art side, I absolutely love strong storytelling and it usually has nothing to do with business or marketing. For example, I love the Moth podcast. I love texture the Moth brings out — the humanity, the heart, the joy, the heartbreak – all the things that make us human.  There’s been plenty of times on my commute that I’ve shed a tear while listening or smiled purely because of a story someone’s narrated. I have no idea who this person is, where this person comes from, but there’s a connection that comes through and it reminds me of the power of words. It reminds me of the value of storytelling, and the privilege we have as marketers to tell powerful stories for our brands.

This article was originally published August 9th, 2023 on ETF Trends.

In this edition, VettaFi CMO Jon Fee sits down with Cboe Global Markets SVP, CMO Megan Goett. The role of the chief marketing office (CMO) has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise, with responsibilities that span pipe, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product. 

Prior to Cboe Global, Megan worked as the Managing Director – Global Head of Digital, DTC, Branding & Design for Morgan Stanley. She also was the Executive Director, Global Head of Mobile & Sales Enablement at J.P. Morgan Asset Management. She got her masters degree at NYU.

Megan Goett on the Differences Between Jobs and Careers

Jon Fee: What is the difference between a job and a career?

Megan Goett: A job, to me, is a short-term opportunity focused on earning money through a paycheck. In contrast, a career is a longer path that prioritizes growth and development aligned with your interests, goals, and values.

I view jobs as an avenue for figuring out one’s career path. Throughout my own career journey, I have held many jobs that helped me define what I wanted in my career. By honing in on what I enjoy and what piques my interest, I was able to identify and pursue my chosen profession.

Fee: That makes a ton of sense. What was your first job?

Goett: My first official job was during high school when I worked at The Gap. While there, I learned the basics of working retail such as how to fold clothes and operate the cash register. As a “Keymaster,” I even had the authority to process refunds – it felt like a big promotion. This experience marked my introduction into what I consider a real job; one where I had a manager who held me accountable and provided performance reviews.

The Master Builder

Fee: With all that in mind, what is your dream job?

Goett: As a highly creative person, I enjoy engaging in hands-on activities such as crafting and building. If I could choose a “purely fun” profession, I would love to become a Lego Master Builder – yes, you heard that right!

Despite the humorous nature of this aspiration, it is one that truly resonates with me. In fact, my love for Legos is so strong that I often purchase them just so that I can build alongside my children. It brings me great joy to explore new designs and create unique structures.

I even take inspiration from the show “Master Builder,” which my kids affectionately refer to me as due to my skill level and enthusiasm for the craft.

Fee: This begs the bonus question, what’s your favorite Lego set?

Goett: [Laughs] While many people are into Star Wars and iconic vehicles like the Millennium Falcon, I find my passion lies with historic buildings. There’s something about these structures that draws me in and captivates my interest.

When it comes to building with Legos alongside my children, we often focus on creating miniature cityscapes. From barbershops to corner delis to apartment complexes, we enjoy constructing a variety of buildings that can be combined to form a bustling metropolis.

One of our favorite sets features a school building complete with everything from the cafeteria to the art room – it’s incredibly detailed and provides endless creative opportunities for us all.

Marketing and Mentorship

Fee: How did you get into the marketing world?

Goett: At the start of my career, I worked for an investment bank that underwent a significant headcount reduction in 2001. Fortunately, I was part of a team that had been performing well and three managing partners spun off to establish their own boutique firm – which I decided to join.

Transitioning from a big corporation to a smaller one presented new challenges as we no longer had access to internal teams who could handle tasks such as PowerPoint creation or marketing efforts. As a result, I found myself working on everything from branding strategy to website development alongside our small team based out of New Jersey.

Despite initially feeling overwhelmed by these added responsibilities, it eventually became clear that this work truly excited me and sparked an unexpected passion for marketing. Through this experience building our brand from scratch, I discovered newfound enthusiasm for creating unique experiences through creative strategies and digital media. From there on out, my career path shifted towards marketing roles where I could continue exploring this passion in greater depth.

Fee: Let’s talk about mentoring. Marketing is a is a unique area for mentoring because the space evolves very quickly. Is there a mentor who got you where you are today? Your story makes me think that you probably figured a lot out yourself, but was there a mentor in there anywhere?

Goett:I previously worked at Morgan Stanley where I had the privilege of hearing Carla Harris speak on several occasions. As a senior woman in the firm, she is well-known for her client advisory work and for also being an opera singer – making her background quite unique.

One topic that Harris often spoke about was mentorship, which really resonated with me. While having mentors can be helpful, it’s having a sponsor that can truly take your career to the next level according to her theory.

Throughout my own career journey, I’ve been fortunate enough to have both mentors and sponsors who provided valuable advice and feedback. However, it was those individuals who truly believed in me and went above-and-beyond by advocating for my abilities; these were my sponsors.

Interestingly enough, both of my primary sponsors directly managed me while working at JP Morgan prior to joining Morgan Stanley. They recognized my potential and pushed me out of my comfort zone into new roles that allowed me to evolve as an employee while testing myself along the way. Without their support, I wouldn’t be where I am today so owe them a great deal of gratitude!

How Megan Goett Uses Customer Service

Fee: That makes a ton of sense. What’s something you learned from an earlier job you had outside of a marketing job that impacts your abilities as a marketer or how you approach your current role?

Goett: Throughout my career, I’ve held a variety of roles starting with The Gap and then transitioning to customer service-focused positions within the restaurant industry. In today’s society, individualization is key – people expect to be serviced on a personal level and have things done their way.

To me, marketing is all about providing exceptional customer service. It’s about having tailored interactions that resonate with your audience on an individual level. This mindset has become ingrained in me and I frequently use this perspective as a guide when crafting messaging or developing digital marketing strategies for clients.

I enjoy helping people – whether it’s troubleshooting an IT issue at work or going above-and-beyond to assist our clients with their needs. By taking the time to truly understand who our clients are and what they require from us, we can deliver personalized services that meet their unique needs.

In summary, delivering effective marketing requires understanding your customers’ requirements so you can tailor communication strategies accordingly while also prioritizing excellent customer service throughout every interaction along the way!

Pets, Pet Peeves, and the Glory of the Oxford Comma

Fee: That’s a great answer. So the next question is… do you have any pets?

Goett: This is my favorite. I have a picture I’m going to pull her up.

Fee: Oh, my God. Yeah, she’s adorable.

Goett: I have to admit, my dog is the cutest thing on the planet – although I know everyone says that so there’s no bias here! Living in New York City, my daughter begged me every day for a pet and while I initially had zero interest in getting one, she eventually got her way.

One rainy Saturday with nothing else planned, my husband and I decided to go for a drive – which somehow resulted in us coming home with a dog! Since then, our lives have been transformed. Our new pup has completed our family and brought us so much joy.

She truly is awesome – sweet-natured and always puts a smile on our faces. Despite having reservations about getting a pet at first, it’s safe to say that this decision was one of the best we’ve ever made!

Fee: The converse of that question is, do you have any pet peeves?

Goett: I think one of my pet peeves in general, not work related, is… I don’t know how you feel about this, because I know it’s very controversial, but the lack of the Oxford comma.

Fee: I’m 100% with you on this one.

Goett: It can fundamentally alter language. Proper punctuation and grammar are incredibly important in written communication – they truly do matter!

Fee: If you had said the opposite, that you didn’t like the Oxford comma, let the record show I would have remained silent.

Goett: I’m glad we share the same opinion on this topic! While everyone has their own set of pet peeves, I believe that mine is particularly relevant to our discussion. One of my biggest work-related pet peeves is when people misspell names – it’s a small detail, but it matters.

For me, paying attention to these details demonstrates a certain level of respect and professionalism towards others. It can be frustrating when my own name is misspelled despite being clearly stated in email communications or other forms of correspondence.

To combat this issue within my team, I always make sure to ask individuals how they prefer to be addressed if their name isn’t immediately clear (e.g., whether someone named Kimberly prefers “Kim” or “Kimberly”). These seemingly minor details can have a big impact on overall communication and demonstrate an attention to detail that clients and colleagues appreciate.

Finding the Routine

Fee: Yeah, that’s another great answer. What daily habits or weekly routines Do you have that keep you sharp as a leader and evolving as a marketer?

Goett: I’ll start by saying that my answer might seem generic, but I truly believe in its value. For me, reading is one of the most important activities for staying informed and up-to-date – particularly when it comes to industry-specific news.

I subscribe to a variety of services that bundle news and provide highlights spanning everything from finance to marketing, as well as more general headline news. This approach helps me stay sharp and on top of both micro and macro trends within my field.

In addition to reading, running is another activity that I find incredibly therapeutic. While it can be tough getting back into the swing of things after taking a break from running, once I’m in the zone I absolutely love it! Running gives me time alone with my thoughts where I can reflect on upcoming goals or projects while gaining mental clarity at the same time.

Overall, these two activities keep me feeling grounded while also making sure that I’m constantly learning new information and staying ahead of any emerging trends within my industry.

Fee: What publications are daily reads for you?

Goett: A big mix. I read Snacks (Robinhood), Skimm, and Wired Daily.

Goett on Leadership

Fee: What’s one thing that has played the greatest role in shaping your leadership style?

Goett: I love this question because it reminds me of one of the most impactful books I’ve ever read as a corporate professional – How to Win Friends and Influence People by Dale Carnegie. One story that has really stayed with me over time is about Bob Hoover, a pilot who experienced engine failure due to the wrong type of fuel being put into his plane.

Despite facing an incredibly dangerous situation, Hoover was able to safely land the plane and immediately approached the mechanic responsible for fueling it. Instead of berating or punishing them, he simply stated that from then on he would only allow that mechanic to service his planes since they had learned from their mistake.

This approach really resonated with me and has shaped how I interact with my own team members when mistakes are made. Rather than getting angry or frustrated at someone’s error, I try to empathize with them and use it as an opportunity for growth instead.

As a leader, it’s important to recognize that people will fail – we’re all human after all! What matters is how you help guide your team through those failures in order to grow stronger together. By fostering open communication and encouraging active learning conversations around mistakes, relationships become stronger within teams while also creating opportunities for individual growth along the way.

Giving Back as a Parent

Fee: That’s great. We’re going to pivot over to volunteerism. Yep. How do you give back?

Goett: As a parent, my focus is primarily centered on family and community-related activities that reflect this stage of life. For example, I have been involved in running backpack drives for school supplies within my local New York City community – an effort that seeks to ensure equal opportunity for all students regardless of socio-economic background.

In addition to these initiatives, I also serve as the treasurer for my children’s school, with a focus on how we can best support those children who require additional assistance. This includes volunteering at various school events and fundraisers throughout the year.

Beyond these efforts, my family has also adopted another family who fled Venezuela as refugees. As part of our ongoing commitment to helping others and teaching our own children about empathy and kindness towards others, we provide them with necessary items throughout the year – especially around holidays when they need it most.

For us specifically last winter season was particularly impactful because they needed winter clothes such as hats and gloves which opened up important conversations about privilege with our own kids while bringing us closer together through shared experiences of giving back to those in need.

Digital Transformation

Fee: Yeah, as a kid, it’s very easy to see your situation as normal and standard. Understanding that there are different degrees of equity, and people have access to different opportunities is an important lesson… So let’s switch gears and talk digital transformation. This is my hard question! Without using the words “digital” or “transformation,” define what digital transformation means?

Goett: In my opinion, the answer to this question is quite straightforward. Essentially, it’s about utilizing technology in a way that fosters innovation and drives growth for your business while simultaneously improving how you interact with clients, customers, and employees.

Fee: Cool. Yeah, that’s a great answer. What is something nobody’s thinking about in terms of digital transformation, but you are keenly aware of?

Goett: While I don’t have a crystal ball to predict the future, one thing that is currently top of mind for me – especially in relation to AI – is digital trust and cybersecurity. While it may not be as flashy or exciting as other aspects of digital transformation, I believe this area will only continue to grow in importance over time.

As marketers, we need to stay ahead of trends such as cookies and two-factor authentication while also understanding how they impact our clients and customers long term. This means staying informed on these issues and taking proactive steps towards ensuring that our own systems are secure.

In my past experience working at great firms like Morgan Stanley, I’ve had the privilege of learning from experts like Jen Easterly who emphasized just how important it is to protect ourselves in this ever-evolving landscape. From a marketing perspective specifically, prioritizing cybersecurity should remain a key priority for years – if not decades – to come.

Looking into the Crystal Ball

Fee: Thinking one to five years out, tell me about your predictions for marketing and marketers. What’s coming next? And how do we prepare?

Goett: While I know it’s a topic that many people are discussing these days, I have to say that AI and machine learning are definitely top of mind for me as well. While there is certainly an element of unknowns when it comes to this technology, I believe that the potential benefits – particularly within marketing – could be really powerful.

There seems to be some concern around whether or not AI will ultimately replace human jobs in the industry. However, from my perspective, I think we need to focus on how this technology can help us improve our business practices rather than worrying about its impact on employment rates.

One area where I see great potential with AI is in leveraging customer data to create more personalized experiences for each individual user. By honing in on what each person wants and needs, we can tailor our marketing efforts accordingly while also building stronger relationships with those customers over time.

Of course there are still questions around just how sophisticated these tools will become over time. Even leaders at companies like Google have expressed concerns about the direction things may take. But overall, I remain optimistic about the power of AI and machine learning so long as they align with core values and ethical principles along the way.

Fee: What’s one headline you expect to read in five years?

Goett: VettaFi took over the world. [Laughs]

Why Goett Loves Ted Lasso

Fee: Amazing! I look forward to our conquest. One last thing, can you share with us an album, book, movie, TV series, or other creative work that’s bringing you joy right now?

Goett: Over the weekend, I was spending time with my parents who don’t have an Apple ID. As a result, I logged in to my own account and introduced them to Ted Lasso – a show that I absolutely love.

What really stands out to me about this series is its ability to tackle complex personal issues in such a raw and authentic way. Unlike other TV shows which often focus on individual characters or storylines, every character within Ted Lasso has their own unique struggles and challenges that they are dealing with throughout each episode.

I also appreciate how well-produced and directed the show is overall. The different individuals are showcased so effectively, allowing viewers to truly connect with each person’s journey.

But what really makes this show special for me is its emphasis on positivity. The character of Ted Lasso himself embodies this quality so fully that it becomes like a beating heart at the center of everything else happening around him. He’s just such an endearing character – even though he may come across as nerdy at times!

Fee: Great choice – Did you watch it from the jump? Or did you come on later? Like what was your Ted Lasso journey?

Goett: I didn’t start watching Ted Lasso from the very beginning – it was more so that I heard people talking about it and then decided to give it a try. I believe I started sometime during season one, but by the time season three came around, I was eagerly anticipating each new episode.

One thing that has been challenging for me is the fact that they release episodes on a weekly basis rather than all at once. While this may be a good thing in some ways, as it allows you to savor each installment and not just binge-watch everything at once.

Despite this though, my husband and I have made Ted Lasso appointment viewing within our household. We’ll both put down our phones or whatever else we’re doing and just sit down together to watch each episode attentively.

To stay connected to Megan, you can follow her on LinkedIn. 

This article was originally published June 12th, 2023 on ETF Trends.

An asset manager’s ultimate goal is to choose the right investment vehicle that financial advisors and investors will actually want to use. The best products can solve real investor problems while covering gaps in exposure.

When it comes to packaging these solutions, asset managers have two core investment options: exchange-traded funds (ETFs) or mutual funds. Each wrapper comes with distinct advantages, but understanding the key differences is essential for bringing the most value to investors.

These are the nine strategic considerations every asset manager should use when comparing an ETF vs mutual fund – including what they have in common and how each is beneficial for investment strategies.

ETF vs mutual fund: How are they similar?

ETFs and mutual funds have plenty in common – after all, they’re both baskets of securities. Let’s take a look at where they overlap:

  • They allow investors to build a diversified portfolio containing multiple assets, without having to buy individual stocks.

  • They offer liquidity. However, ETFs are often a more liquid product due to their unique trading mechanisms, which reflect how individual stocks are traded.

  • They provide opportunities to customize a portfolio based on investment strategy, risk tolerance, and investment goals. 

  • They are subject to regulatory oversight.

While it can depend on a person’s investment style and particular investment objectives, portfolios are likely to include a combination of both types of investment vehicles.

Most portfolios rely on having an array of investments across different asset classes. The 60/40 portfolio (60% equities, 40% fixed income) has been a long-running standard, but market uncertainty sometimes gives rise to alts like commodities and REITs. Both ETFs and mutual funds can offer exposure to equities, fixed income, or alts. 

Check out: Best practices for launching an ETF

The 5 benefits of building a portfolio with ETFs

The ETF has seen a boom in recent years. What began as a niche product has become mainstream, as financial advisors and investors are more aware of the advantages the ETF wrapper delivers. 

 Advantages include:

  1. Trading flexibility
  2. Lower expense ratios
  3. Greater tax efficiency
  4. No minimum investment requirements
  5. Greater transparency

 Below, we take a closer look at each of the five advantages to learn why some investors prefer ETFs over mutual funds.

1. Trading flexibility

Because ETFs trade like stocks, they offer enormous trading flexibility. By contrast, mutual funds trade only once per day at a fixed price. ETFs allow intraday trading, giving investors the ability to buy and sell on their own schedule rather than being locked into end-of-day pricing.

2. Lower expense ratios 

ETFs started as index funds, which meant they didn’t require active management and could maintain lower expense ratios than mutual funds. 

While actively managed ETFs have emerged and become an increasingly popular option, they still tend to have lower costs than their mutual fund counterparts. 

This cost advantage persists because ETFs’ structural efficiencies and investor expectations for lower management fees keep expenses down across the entire category.

3. Greater tax efficiency

ETFs typically create lower tax liabilities than mutual funds due to their unique structure and trading patterns. ETFs tend to hold their investments longer, generating fewer taxable capital gains. 

 Additionally, when ETF investors want to sell shares, they trade with other investors on the exchange rather than forcing the fund to sell underlying holdings. 

 By contrast, mutual funds must sell securities more frequently to meet redemption requests, creating capital gains distributions that get passed on to all shareholders.

4. No minimum investment requirements

Mutual funds typically require minimum investments. While some brokers now offer fractional mutual fund shares, this isn’t universally available. 

 ETFs eliminate this barrier entirely: investors can buy a single ETF share for the current market price, making them far more accessible to investors with smaller account balances.

5. Greater transparency

ETFs generally offer greater transparency than mutual funds. Most ETFs disclose their complete holdings daily, giving investors a real-time view of exactly what they own. This transparency helps investors better understand the fund’s net asset value (NAV) and make more informed trading decisions. 

 Mutual funds face no such disclosure requirements and typically reveal holdings only quarterly. Some mutual fund managers deliberately keep their strategies confidential to prevent competitors from copying their positions.

 You might like: 7 tips for cost-efficient ETF operations

The 4 advantages of having a portfolio with mutual funds

ETFs may be gaining popularity, but mutual funds are not without their advantages and still have an important role to play in an investor’s portfolio. As of 2024, 56% of American households have mutual funds in their portfolios, according to the Investment Company Institute. 

Mutual fund benefits include:

  1. Professional fund management

  2. No bid-ask spreads

  3. Automatic investing

  4. No trading commissions

Next, let’s review these four key advantages to understand why some investors prefer mutual funds to ETFs.

1. Professional fund management

While both ETFs and mutual funds offer actively managed options, mutual funds have a longer track record in active management. A skilled portfolio manager can add significant value, particularly during market uncertainty and when making strategic investment decisions about broader market conditions. 

Unlike index funds that must track their benchmark regardless of market conditions, active managers can adapt their strategy in real time based on changing circumstances. This flexibility allows them to potentially protect against volatility, pursue rebalancing opportunities, and maximize returns when possible. 

Although passive mutual funds exist, most mutual funds employ active management. This brings both the potential benefits and higher costs that come with professional oversight.

2. No bid-ask spreads

ETFs have intraday trading advantages, but mutual funds’ once-daily pricing can actually benefit investors in certain situations. Mutual funds eliminate bid-ask spreads entirely: every investor buys and sells at the exact same net asset value (NAV) calculated at the end of the day when the market closes. 

This uniform pricing protects investors from the trading costs and timing pressures that ETF investors face throughout the day. While intraday flexibility creates opportunities for skilled traders, it can also lead to costly mistakes that mutual funds’ simplified structure helps investors avoid.

3. Automatic investing

Mutual funds tend to have the ability for investors to set up automatic investment plans for dollar-cost averaging, supporting long-term financial planning. Generally speaking, ETFs don’t allow for automatic investing.

Automatic investing is a huge perk, as it is a significant benefit for people looking to invest for the long term. This is one reason why mutual funds have become an important vehicle for retirement planning rather than short-term tactical trades. 

A no-load index mutual fund can be ideal for investors who are making routine deposits, as they are sold without a commission or a sales charge. 

4. No trading commissions

Another advantage of mutual funds is the absence of trading commissions, unlike many ETFs that still charge these fees. Combined with automatic investing capabilities, this makes mutual funds particularly cost effective for long-term investors. Without commission fees eroding returns on each transaction, investors can focus on building wealth rather than managing trading costs.

Finding the right fit

Use these nine strategic considerations to help you decide which wrapper is ideal for each of your investors. While ETFs might seem like the natural evolution of the mutual fund, each investment vehicle serves specific investor needs. 

Rather than viewing one as superior, asset managers who recognize the strengths of both ETFs and mutual funds can build better, diverse product lineups that appeal to more investors with different financial goals.

VettaFi helps asset managers at every stage of the product life cycle. If you’re interested in developing an ETF or a mutual fund, talk to one of the experts from our index team or digital marketing team today.

Up next: 7 ETF marketing tactics to attract investors

Software platforms have come a long way since the early days of personal computing in the 1980’s running on MS-DOS and Microsoft Windows. In the 1990’s the internet and web platform era enabled new methods of software delivery via browsers and mobile applications. Today’s software platforms are cloud-based as software as a service (SaaS) or mobile applications built for iOS and Android. In addition, artificial intelligence functionality is also being integrated with today’s software platforms, combining artificial intelligence with traditional software functionality. 

A software platform provides the foundation or infrastructure upon which software applications can be built and run. From an investment standpoint, software platforms offer many strategic business advantages, including: 

  • Low Marginal Cost - Software platforms are scalable businesses that support high margins and revenue growth at scale with virtually no marginal costs or the need for debt financing. 

  • Competitive Moats - Low incremental sales costs mean more revenue can be used to innovate, build new products, and provide increased utility to customers, creating a sustainable competitive advantage.

  • Recurring Revenue Models - Most software platforms operate under subscription-based models (SaaS), generating recurring revenues with high customer retention. The SaaS model is also tariff-resistant. 

  • AI and Innovation Tailwinds - Artificial intelligence and applications such as generative AI are creating new opportunities for software companies, as investor focus shifts from hardware infrastructure to software applications. 

One of the critical strategic advantages for software platforms is scalability. While the marginal cost of traditional goods increases with production due to resource constraints, the marginal cost of digital goods trends to zero as production scales. As a result, investing in software platforms creates an attractive opportunity for investors.

Historic rise of software1

1951 - UNIVAC became the first commercially produced computer, advancing the need for software. 

1952 - Grace Hopper developed the first compiler which translated symbolic code into machine code. 

1960 - COBOL, one of the earliest high-level programming languages, was developed.

1964 - IBM introduced the first family of mainframe computers, the IBM System/360. 

1972 - The C programming language was developed by Dennis Ritchie at Bell Labs, revolutionizing software development and leading to Unix.

1980 - Microsoft’s Disk Operating System (MS-DOS) became the standard operating system for personal computers. 

1984 - The Macintosh, with its graphical user interface, brought more user-friendly software to the masses.

1991 - The World Wide Web was created by Tim Berners-Lee.

1995 - JavaScript was introduced, becoming a crucial language for web development.

1997 - Microsoft released Windows 95.

2001 - Apple introduced Mac OS X.

2002 - The rise of cloud computing with Amazon Web Services (AWS).

2006 - Google App Engine cloud platform is launched, and AWS’s EC2, which allowed users to license virtual machines.

2007 - Netflix becomes a video streaming service on the cloud.

2008 - The launch of the Apple App Store kicks off the mobile application era.

2009 - Microsoft launches Azure, marking its entry into cloud. 

2015 - The term "Artificial Intelligence" gained widespread attention as machine learning and AI became an integral part of software development.

2020 - The COVID-19 pandemic gave rise to remote work solutions.

2022 - Quantum computing advances.

2023 - Generative AI becomes mainstream with the release of OpenAI’s ChatGPT.

Scalability

In 2011, venture capitalist Marc Andreessen famously announced that “software is eating the world.” Andreesssen was referring to software’s role in digitizing industries and transforming and scaling the way businesses and consumers interact. Software companies can maintain high profit margins because the incremental cost of adding new customers is low. 

Software is scalable. While the marginal cost of traditional goods increases with production due to resource constraints, the marginal cost of digital goods trends to zero as production scales.

Comparing marginal costs

High Substitution Costs

Another key attribute protecting profits is that there are high substitution costs associated with switching from one software solution to another. Users risk losing data, functionality, and productivity time when they make a switch. 

Competitive Moats and Large Barriers to Entry

Software vendors often have large barriers to entry given the significant R&D required to maintain functional superiority and service its broad customer base. This creates a barrier to entry and a competitive moat for small startup operations. 

Recurring Revenue Model

Today, most software companies have adopted subscription-based, recurring revenue models. This business model provides for predictable cash flows, assuming there are high renewal rates and low customer churn. 

Premium Valuation, Superior Growth

Given their long-term profitability and scalability, recurring revenue model, and high level of customer retention, software companies tend to trade at above market multiples. As seen in the table below, companies in the VettaFi AOT Software Platform Index trade at a premium valuation relative to the VettaFi 500 TR Index, but also exhibit superior earnings and sales growth characteristics. 

  VettaFi AOT Software Platform Index VettaFi 500T Index
Trailing Price/Earnings 27.16   22.93  
Forward Price/Earning 26.08   20.99  
Trailing EV/Sales 7.06   4.32  
Forward EV/Sales 6.55   4.11  
EPS Growth (%) 11.32   9.08  
Sales Growth (%) 9.40   5.56  
Dividend Yield (%) 0.45   1.19  
         

Source: VettaFi, as of 6/30/2025

At the forefront of innovation

Historically, software has been at the forefront of innovation and disruption, from the early days of MS-DOS and Windows to today’s digital cloud-based and mobile computing applications. Strides in AI-powered development, quantum computing integration, edge computing, and extended reality are driving the next wave of software innovation, along with other disruptive trends such as low-code and no-code software development.3   Software technology and innovation will play a pivotal role in transforming the digital landscape of the future.

Capturing the rise of digital tollbooths

The software industry is undergoing a profound transformation, shifting from traditional Software-as-a-Service (SaaS) models to a "digital tollbooth" paradigm, where platforms capture a percentage of every transaction processed through their ecosystems. Companies like Toast, Unity, Amazon, Shopify, Visa, Paylocity, and Robinhood exemplify this evolution, positioning themselves as critical infrastructure that automates complex tasks, minimizes human error, and delivers unparalleled value to users. By embedding themselves into the transactional flow—whether it’s processing payments, powering in-app purchases, or streamlining payroll—these platforms function like tollbooths, collecting a small but consistent cut of the revenue they enable. This model not only ensures scalable, predictable revenue streams but also creates high switching costs, as businesses and consumers become deeply integrated into these ecosystems. As automation and digitization continue to reshape industries, the digital tollbooth model represents a powerful investment opportunity, capitalizing on the exponential growth of transactional volume in an increasingly digital economy.

Our index approach

The AOT VettaFi Software Platform TR Index (SOFTT) tracks the performance of the top companies that rely on, contribute to, or create software platforms that enable the functionality and delivery of services.  

The index selected the top ranked companies from its Software Platform universe. Scores used for ranking combine measures of quality and market leadership. 

Companies are classified, based on their business model and activities, as software-driven enterprises where their Software Platform is a main driver of their business, and/or their products are crucial to Software-Driven Enterprises. These companies must be at least materially engaged with 20% of their revenue from software-driven enterprise business activities.

“Software Platforms” refer to integrated software systems or frameworks that serve as foundational technologies enabling the development, deployment, and operation of applications, services, or digital ecosystems. 

These platforms are essential to the functionality and strategic direction of Software-Driven Enterprises, which rely on software as a core enabler of their business models, product offerings, and operational capabilities. Designed to be extensible and scalable, these platforms often support broad user, client, or developer ecosystems. 

Within Software-Driven Enterprises, a Software Platform may include: 

  • Cloud infrastructure platforms – Systems that provide on-demand computing, storage, and networking services (e.g., IaaS and PaaS solutions). 
  • Enterprise software platforms – Core business applications such as customer relationship management (CRM), enterprise resource planning (ERP), and human capital management (HCM) platforms. 
  • Application development platforms – Tools and frameworks that support the creation, testing, and deployment of software applications, including low-code/no-code environments. 
  • Data analytics and artificial intelligence platforms – Platforms that support large-scale data processing, machine learning, business intelligence, and predictive analytics. 
  • Middleware and integration platforms – Software that facilitates communication, data exchange, and interoperability between disparate systems and applications. 
  • Industry-specific software platforms – Specialized platforms designed to meet the unique technological needs of verticals such as healthcare, ecommerce, financial services, education, or logistics. 

Companies that develop, license, or use Software Platforms as a core part of their operations, and whose platforms are mission-critical to the infrastructure, innovation, or service delivery of their enterprise or other Software-Driven Enterprises, are considered relevant under this definition. These platforms often enable digital transformation, operational efficiency, automation, data intelligence, and scalable ecosystems across multiple industries. 

Additionally, companies must trade on eligible US exchanges and meet the following minimum criteria: 

  • 3 Month Average Daily Trading Value

  • 1 million USD Float Market Cap Percent 

  • 20% Full Market Cap: 100 million USD 

At least 80% of the value of the index must be composed of principally engaged companies that derive at least 50% of their revenues from software-driven enterprise business activities as listed in the appendix. The top 50 ranked companies within the index’s universe are selected with a 10 company ranked buffer for current constituents. 

Companies must have a positive Earnings to Price ratio. Ranking is based on the average of a factor score rank and a market cap rank. The factor score is calculated based on a company’s Cost of Goods Sold/Revenue, Earnings to Price, and Return on Invested Capital.

Materially engaged companies (those with less than 50% revenue in software-driven enterprise business activities) are capped at 20% and their excess weight is redistributed pro-rata to the principally engaged companies (those with at least 50% revenue in software-driven enterprise business activities). Constituents are weighted by float modified market cap with a maximum weight of 7.5% and a minimum weight of 0.5%. 

The index rebalances on a quarterly basis on the third Friday in March, June, September, and December. 

The AOT VettaFi Software Platform TR Index (SOFTT) has been licensed by AOT for an ETF on the ETF Architect white label platform trading under the ticker symbol AOTS.

More information about the index can be found here.

1https://www.geeksforgeeks.org/software-engineering/evolution-of-software-development-history-phases-and-future-trends/

2Grieb, Frederick. State Street Investment Management, Software: Still Eating the World Just Taking a Pause to Digest, October 22, 2024. 

3Simplilearn, Future of Software Development: Trends & Technologies of Tomorrow, April 26, 2025. 

Evan Harp sat down with J.P. Morgan Asset Management’s Danius Giedraitis to discuss data, AI, and the future of asset management.

Evan Harp: Tell us a bit about yourself and your work with data.

Danius Giedraitis: I lead a global business intelligence and analytics team within J.P. Morgan Asset Management. We work a lot with trying to use data to drive distribution strategies. So, it's something I'm passionate about, it's something I've seen the growth of firsthand. 

I've been in the industry for almost 15 years. The big “aha moment” for me came at the culmination of a lot of time and energy with our stakeholders in distribution leadership and marketing leadership. One of the things that really felt like data was finally at the table was when we worked with some of our distribution heads to actually create and drive a new coverage strategy. We're talking about a strategy that requires millions of dollars of investment. It requires hiring human capital. It requires a lot of analysis for the market opportunity. 

Historically, data was a foreign language to a lot of leadership. They relied on intuition and anecdotal evidence. Now data has clearly become the centerpiece for distribution strategy. It's embedded in the decision-making framework and continues to integrate and entrench itself into the fabric of our organization, and hopefully many other organizations as well.

Why data matters

Harp: A lot of evidence supports the power of data. McKinsey & Co. has noted that organizations that leverage customer behavioral insights and data outperform peers by 85% in sales growth and more than 25% in gross margin. Despite that, financial services is often seen as trailing other industries when it comes to deploying data. Do you agree finance is behind, and if so, why do you think that is?

Giedraitis: I think there's no shortage of data being generated. For me, the opportunity feels like harnessing it and applying it in the most powerful, intelligent ways, and I would say there are probably worse industries. At the same time, I do think that there's probably still quite a bit of space for finance to more dynamically apply data insights.

And so, I do choose to agree somewhat with that statement, but with the understanding that there are probably some ways that finance actually is quite far along relative to other industries. But I think there's a lot more opportunity to be a little bit more thoughtful with where and how we're using the data that we're generating. 

Harp: Where do financial institutions trip themselves up when it comes to data, and what can they do differently?

Giedraitis: I think some data teams feel like every number or attribute or field that they can report on, they should. So many organizations think that more data equals better outcomes, and I think it is important to consider, with respect to all metrics, that a few metrics matter more to drive the PnL, to drive the customer experience, to drive the customer engagement.

The thing organizations can do differently is to be as thoughtful and intentional with understanding what those metrics actually are. I think a lot of well-meaning effort is put into generating all sorts of new data, at the expense of not collecting and deploying insights from the key metrics and data points that drive the signals that you’re interested in. 

It is also critical to define what your systems of record are like. Because, often, what we see is people copy data to this server and this database and that database, and so you have this spaghetti bowl of data that's copied all over. Define your systems of record. When you have those defined and you have processes to maintain the quality of it, then think about how you start to stitch that data together. Because when you start to stitch the data together, I think that’s when you start to provide more relevant insights, more relevant reporting, and more relevant metrics for the stakeholders.

All of that, I think, goes a long way in terms of getting people comfortable with using data to make decisions.

How to change an organization’s relationship with data

Harp: That makes a lot of sense, but how do organizations actually navigate implementing those changes?

Giedraitis: Organizational change is in some ways just as hard, if not harder, than the actual technology investments, the data investment, etc. However, what I have found is to drive that broader change, understanding, education — it's really hard to centralize it from a small data team. 

What works well is finding the power users, the data-literate individuals across different functions and teams to become extensions of what you're trying to achieve as a data organization. It's very difficult to drive that organizational buy-in without really clearly creating a strategy of education, of building the trust. It starts with leaning on the more data-literate in an organization and building from there.

Once you have the organization properly leveraging data, it can help your market strategy and client experience. Ultimately, you're trying to deliver to a client, a customer, or stakeholder, whoever.

Now, 10, 15, 20 years ago, there were maybe one or two channels of engagement. That has completely exploded in the last decade. And so I think one of the things that's really important to think about and that we have found so critical to understand is, what are our clients interested in? How do you connect their engagement profile across fragmented systems and channels? Has this prospect engaged with one of our webcasts? What other webcasts have they attended? Who are they outside of their professional life? What have our salespeople talked to them about? Are they deeply embedded in our ecosystem, or have they maybe just purchased a product or two? These kinds of insights can help teams deliver the right offers in the right way and drive actual impact.

AI continues to be top of mind

Harp: Let’s pivot to AI. Though controversial in some corners, many organizations are embracing the potential efficiencies AI and machine learning can provide. How should organizations be approaching this new technology?

Giedraitis: I think what we're trying to do, and what a lot of organizations are trying to do, is when you build these machine learning algorithms that deliver some suggestion or some recommendation to a stakeholder, their behavior then can also inform the next iteration or the next version of that capability. A lot of social media organizations are doing this. You think about TikTok, and their algorithms. You think about Instagram, and their algorithms. Getting people more embedded into using data and thinking about data as part of their daily practice is helpful, and it also builds the capabilities and makes them more robust. How people provide feedback and how their behaviors inform future versions of those capabilities is important to consider.

To me, it all bubbles up together, right? And so getting people comfortable, getting people engaged, getting feedback up front and over time evolves the capabilities themselves. It all works together. If you're missing certain pieces of that, the system starts to sort of break down and you're not moving forward.

What I'm seeing is, within our industry, teams need the right data delivered the right way to drive impact, and that AI and machine learning enhances decision-making but still requires human expertise. They can do more with the same, is how we've been framing it, and I think taking out the “no joy” parts of a job away is a big deal. AIso, I think there's a lot of risk and compliance assistance that maybe AI can provide. 

Of course, when you're talking about transforming the client experience, there's still some human in the loop that will need to persist for some period of time.

When it comes to modernizing platforms, that's a hard decision to make because it takes a lot of energy, a lot of investment, and it's sometimes the foundational transformation that's needed to enable the AI capabilities. So, it's not necessarily seen as exciting, and the outcomes aren't felt as acutely by senior leaders right away. But I think, with time, we're going to see more and more from the inside moving out, because that to me feels like the larger opportunities and larger green spaces down the road.

Looking for a partner to help you leverage your data? Talk to our experts.

VettaFi’s Axel Belorde appeared in ETF Stream’s live webinar, “European Defence Revolution: Investing in the Next Generation of Security.” Host and Editor Jamie Gordon and HANetf’s Head of Research Tom Bailey also filled out the panel.

European defence booms amid geopolitical tensions

Bailey outlined the recent history of European defence investing. The end of the Cold War marked a decades-long decline in military spending around the world. Europe experienced this particularly harshly, with huge drop-offs until 2014, when Russia invaded Crimea. This resulted in a pledge by NATO members to achieve a 2% of GDP defence spending target by 2024.  Russia’s invasion of Ukraine has led to substantially more massive spending upticks, with nearly 18% in 2024, and 2025 is on track for even more spending.

According to Bailey, much of the increase in spending is likely to be on equipment, which Europe has historically neglected following the end of the Cold War.

Future of Defence UCITS ETF

HANetf’s Future of Defence UCITS ETF, developed with TMX VettaFi as the index partner, looks to take advantage of the increase in European defence equipment spending. Capping any country at 60% of holdings, guaranteeing enough exposure to Europe and positioning the fund to take advantage of growth in the European defence sector. This unique defence ETF splits its exposures primarily between industrials and technology, including cybersecurity.

 

“It is important to think that there are many areas of defence. You can’t just get it — in terms of exposure in your portfolio — if you buy your traditional industrial exposure,” Belorde noted. Traditional war might be waged on land, sea, or air, but cyber is becoming more critical. “Increasingly, it's more about data, and this is how we built our investment approach.” 

Covering the entire defence value chain

Rather than limiting exposures purely to industrials, Belorde made the case to capture the entire value chain of defence. Hardware is important, but data wins wars, according to him. “The wars of tomorrow, the special operations of tomorrow, often start with cyber attacks.”

One often-overlooked investment arena is in the securing of information flow. In war, data is important but, Belorde noted, “better no data than compromised data.” Companies like CrowdStrike and Palo Alto Networks help provide the data security that is becoming an increasingly critical component of modern warfare.

Further making the case for a diverse array of companies and the importance of cybersecurity exposures in defence investing portfolios, Belorde asked, “When you build great hardware … are you really the best at building great software?”

Cyber defence in future wars

More and more countries in NATO are allocating larger portions of their defence spending to cybersecurity.  Belorde said, “There’s huge danger if the anti-drone assets deployed once or twice do really well, but for example, the signatures get inverted, and your own equipment starts to destroy your own new technology. This is why we want to allocate to cyber defence players.”

The EU view

The European Defence Agency is increasingly seeing the value of cognitive superiority. Achieving that requires:

  • Competition for intellectual superiority
  • Nearly real-time situation awareness
  • A multidomain operational picture
  • Automation of cyber activities

  • Real-time narrative

Belorde noted, “This requires a lot of effort in terms of integration, of permissioning data sets, and increasingly permissioning AI agents into the loop.”

One of Europe’s defence challenges is that it has a fragmented supply chain of in-service weapons. It also has significantly more equipment types, as different countries have different tech preferences, systems of operation, and military doctrine. While the US has 33 different weapon systems to maintain, Europe collectively has 179. Additionally, we have seen such a decline in European military spending — particularly on the equipment side — that some systems are now obsolete but still in service. 

“The problem is, when you want to work together, you do need to integrate data,” said Belorde. “Leaders around the world are increasingly concerned by that, and they want to buy software that solves for that problem.”

It is worth remembering that pure-play cybersecurity companies aren’t common in Europe, and some key firms in defence tech aren’t even listed. “In Europe, you’re just going to have to monitor the private markets and wait for some of the names that are pure play defence technology companies to be listed,” he added.

What the US can reveal about European possibilities

The US Department of Defense spends 1% of its budget on software. That sounds low, but it is a significant difference maker and gives America a military advantage. “To win, you have to spend more on software,” Belorde said. Even if the new administration is looking for budget cuts, it is likely that operational AI software delivering real value will continue to see its share of the pie grow, while legacy ERP-type software creating lock-in but little value and often coupled with costly consulting implementations will suffer. Software spend is expected to increase, including investment in disruptive technologies. “The spending mix has to go more toward operational AI and the overall bucket of software allocations should grow,” he explained.

AI has enormous military potential. BVR (beyond visual range) combat is possible with enough advancements in technology. Anti-aircraft and drone countermeasures, and small, drones can all provide a critical edge. “Increasingly, you will see autonomous systems versus autonomous systems,” Belorde said. As there are fewer and fewer full-time soldiers, the role of robotics and automation are gaining increased military importance. 

Space, above & beyond

One if by land, two if by sea, three if by air and … four if by space? 

Though space might not be a viable option for an invading force, it is likely that it will play an increasingly important role in warfare. Much of this is due to technology, including AI. “AI is pretty good at processing mass satellite imagery and trying to extract information from it,” Belorde noted. 

Human operators are still needed, as AI continues to struggle with picking up on small objects, but satellites in space are expected to play an important role in the future of warfare. This, in turn, also speaks to the importance of automation. The companies that create and maintain satellites are likely to be beneficiaries of increased defence budgets. As geopolitical tensions mount and real-time information becomes critical, companies engaged in conquering “the final frontier” could see increased relevance, creating opportunities for investors.

Looking to learn more about how to index defence? Speak to our experts.

 

The uncertain environment has created a sustained increase in defence spending and heightened demand for advanced, future of defence, military capabilities

The Indo-Pacific region includes the countries of Australia, India, Indonesia, Japan, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand. The region has become an area of rising strategic importance due to China’s global military expansion, ongoing tensions in the South China Sea related to uncertainty about Taiwan, and most recently an escalation of tensions between India and Pakistan. NATO, the United States, and its allies have identified the Indo-Pacific region as a top defence priority. This has translated into record-high defence budgets, new joint cooperation frameworks such as AUKUS, the U.S.-Japan (USJF) Alliance, and the U.S.-India TRUST, and a renewed focus on technological innovation and capacity expansion.

The Indo-Pacific defence market constituted 22% of the world’s total global defence expenditures in 2024.1 China’s defence spending amounts to 46% of the region’s total, followed by India, Japan, and Taiwan, combining for a total of 26%. While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective with
the potential to equip other countries in the region. Defence industrial bases of smaller — but growing — capability are also being cultivated in Australia,
Indonesia, Malaysia, Thailand, and Vietnam. Ultimately, similar to Europe, the future of Indo-Pacific defence is expected to become a region less dependent on foreign-sourced technologies and equipment, with the potential to partner and supply other nations on a surplus basis.

The case for Indo-Pacific defence exposure is as follows:

  • Rising tensions in the region: Rising geopolitical tensions and perceived threats from China, North Korea, as well as regional disputes are fueling record defence spending in the region.
  • Desire for regional autonomy: Push for expanded regional production and innovation along with reduced foreign dependency.
  • Strategic importance driving investment: Policy and budgetary support from NATO, the U.S., and allies, given the region’s strategic importance.

Indo-Pacific defence market

The Indo-Pacific region constituted 22% of the world’s global military expenditures in 2024. China’s defence expenditures amounted to 46% of the region’s total spending on defence, with India, Japan, and Taiwan combining for 26%.2  While currently 65%-70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective, with the potential to equip other countries in the region.

pie chart showing 21.8% Indo-Pacific defence spending vs 78.3% by the rest of the world

 

 

The Indo-Pacific region includes the countries of Australia, India, Indonesia, Japan, New Zealand, the Philippines, Singapore, South Korea, Taiwan, and Thailand. The region has become an area of rising strategic importance, due to China’s global military expansion, ongoing tensions in the South China Sea related to uncertainty about Taiwan, and most recently an escalation of tensions between India and Pakistan. 

The uncertain environment in the region has created a sustained increase in defence spending and heightened demand for advanced, future-of-defence, military capabilities.  NATO, the United States, and its allies have identified the Indo-Pacific region as a top defence priority. This has translated into record-high defence budgets, new joint cooperation frameworks such as AUKUS, the U.S.-Japan (USJF) Alliance, and the U.S.-India TRUST, and a renewed focus on technological innovation and capacity expansion.

The Indo-Pacific defence market represented 22% of the world’s total global defence expenditures in 2024. China’s defence spending amounts to 46% of the region’s total, followed by India, Japan, and Taiwan, combining for a total of 26%.  

2024 Defence spending by country ($USD)

While currently 65–70% of its military inventory is foreign-sourced, increasingly, countries such as Japan, Singapore, South Korea, Taiwan, and India are becoming more self-sufficient from an equipment perspective, with the potential to equip other countries in the region. Defence industrial bases of smaller, but growing, capability are also being cultivated in Australia, Indonesia, Malaysia, Thailand and Vietnam. Ultimately, similar to Europe, the future of Indo-Pacific defence is expected to become a region less dependent on foreign-sourced technologies and equipment, with the potential to partner and supply other nations on a surplus basis. 

The investment case

The case for Indo-Pacific Defence exposure is as follows:

  • Rising tensions in the region - Rising geopolitical tensions and perceived threats from China, North Korea, and regional disputes are fueling record defence spending in the region.

  • Desire for regional autonomy - Push for expanded regional production and innovation along with reduced foreign dependency.

  • Strategic importance driving investment - Policy and budgetary support from NATO, the U.S., and allies given the region’s strategic importance. 

A growing military presence of the U.S. and China in the region, alongside other regional powers, is fueling demand for “future of defence” advanced weaponry and defence systems.  All of this means, there is more defence and defence technology spending to come, creating growth opportunities for defence and cyber defence companies in the region. According to Forecast International, growth in the Indo-Pacific defence market is expected to reach $534 billion in 2025, with growth to $644 billion by 2030.  

Our index approach

The VettaFi Future of Defence Indo-Pac ex China Index tracks the performance of companies from the Indo-Pacific region ex China that generate revenues from defence and cyber defence spending.

In order to be eligible for inclusion, companies must meet the following requirements:

  • Constituent business operations must derive more than 20% of their revenues from the manufacture and development of defence equipment (military armored vehicles and tanks, weapon systems and missiles, munitions and accessories, electronics and mission systems, and naval ships), defence technology applications, or cyber security and contract with an included country verified by publicly available contract information. 

  • Companies developing naval ships with less than 20% defense related revenue may be added if their defense related revenue is at least $3 billion USD.

ESG/human rights filter: Constituent business operations must comply with United Nation Global Compact (UNGC) principles and Organization for Economic Cooperation (OECD) Guidelines for Multinational Enterprises.  

Controversial weapons filter: Constituent business operations must derive less than 20% of their revenue from controversial weapons.

Weighting: Constituents are modified free float-market cap-weighted. The Index is reconstituted and rebalanced on a quarterly basis on the fourth Tuesday in January, April, July, and October.

VettaFi’s Future of Defence Indo-Pac ex China Index (IPDEF)  has been licensed in Europe by HAN ETFs for an exchange traded product expected to launch in July 2025. For more information about the Index, click here. 

Expense ratios have become more and more competitive, creating opportunities while putting pressure on fund managers. With more than 3,000 exchange-traded funds (ETFs) on the market, investors are gravitating toward those with lower expense ratios — making low-cost operations a necessity. 

There are unavoidable admin fees and operational expenses associated with every fund, but streamlining your ETF index maintenance costs can give you an edge. Lowering maintenance costs also lowers your fund’s expense ratios, which means investors are far more likely to invest in your product. 

Here’s how ongoing maintenance costs impact your ETF expense ratio, with tips for the best ways to minimize these recurring expenses.

Why do investors care about your ETF expense ratio?

Savvy investors know that every ETF expense ratio comes directly out of their returns. Over time, those seemingly small percentages can add up and devour your ETF’s performance.

When investors compare two similarly performing funds covering the same market exposures, the choice becomes mathematical: why give up 0.50% of your returns when you could give up just 0.25%? Unless that higher-cost fund offers something exceptional in track record or differentiation, the lower expense ratio wins every time.

This puts pressure on fund managers to keep their net expense ratio as competitive as possible. ETF expense ratios have been steadily declining, with 2024 averages hitting 0.14% for index equity ETFs and 0.10% for index bond ETFs. Low expense ratios are part of what’s driving ETFs toward dominance, especially when compared to equity mutual funds, which averaged 0.40% in 2024.

Core ETF maintenance costs

Issuers who want the lowest possible ETF expense ratio should consider the annual fees for the following maintenance expenses:

1. Index licensing expenses

The right index determines what investors will benchmark your performance against and shapes the entire investment experience for any index fund or ETF. When launching new funds, issuers need responsive index partners who can translate their market vision into a trackable benchmark.

Even if your ETF is already live, it’s worth it to periodically review your options. A licensing fee difference between 0.03% and 0.04% might seem trivial for a $10 million fund, at just $3,000 versus $4,000 annually. But scale that same ETF to $10 billion in assets, and suddenly you’re choosing between paying $30 million or $40 million. That $10 million difference can make or break the competitiveness of your ETF.

2. Rebalancing expenses

Over time, funds must rebalance in order to maintain their strategy. Every fund has a deliberate strategy behind its asset allocation and risk profile. 

Some investments might outperform others, or new opportunities may arise. Rebalancing a fund to make strategic adjustments and maintain that vision comes at a cost.

3. Custodial and safekeeping expenses

Every investment needs safekeeping. A fund’s assets require a custodian to hold them, which comes with fees. ETFs that hold foreign securities or use investment strategies centered on complex financial instruments are more challenging for custodians to manage and can carry higher fees.

4. Administrative and legal expenses

Every ETF comes with administrative and legal fees, which cover everything from regulatory compliance and SEC filings to board oversight and audit costs. Keeping these fees low can help issuers keep their expense ratios grounded.

Legal costs can swing up or down with regulatory changes and documentation updates, so keep a close eye on them. While they might look like fixed overhead, fund managers can find ways to cut expenses without cutting corners, making their ETF operations more cost efficient.

Related: 7 tips for cost-efficient ETF operations

Index licensing costs

As discussed, licensing an index for a new fund that hasn’t built significant AUM typically costs 0.03-0.04%. Specialty indices command higher fees, but even these specialized options rarely exceed 0.10%.

Self-indexing offers one way to avoid licensing fees, but it comes with its own costs and time requirements. For many issuers, self-indexing can actually be more expensive than licensing an index from a provider.

Types of indices

Different index types carry a variety of associated costs:

  • Broad-based indices track the performance of a group of stocks. These stocks are selected to represent the broader market. Examples include the S&P 500, NASDAQ Composite, and Russell 3000.
  • Specialty indices are narrowed to a specific niche. TMX VettaFi’s ROBO Global Robots and Automation Index (ROBO), for example, focuses on the global value chains of robotics, automation, and enabling technologies like AI. 
  • Custom and direct indices are often considered the next frontier of investing. Direct indexing can create simulacrums of existing indices, while custom indexing creates more personalized indices.

Evaluating index licensing costs 

All index types have unique needs that can impact licensing costs. Here are some questions to consider:

  1.  What is the licensing fee?
  2.  Is this fee fair, considering the maintenance challenges and complexity of the index?
  3.  How will the rebalance frequency impact costs?
  4.  How complex will maintaining this index be?
  5.  What is the methodology, and will it have an impact on costs, fees, or overhead?

If an issuer creates their own bespoke index, they may end up dividing their time and energy between managing the index and the product, further underscoring the value of a good index partner. 

“The relationship between asset manager and index providers is crucial to the success of an ETF,” said TMX VettaFi’s Cinthia Murphy. “As the product provider, what you want is not just a vendor who’s behind a benchmark development and calculation, but a true partner who’s committed to the growth of the product, fighting in the trenches with you. VettaFi is unique from that perspective because the business model is built on partnerships. From index creation and calculation to ETF product marketing and distribution, VettaFi is a partner committed to each index ETF’s ultimate success.”

Rebalancing costs

Another common ETF cost comes from rebalancing. When an index adds or removes companies, ETFs tracking that index must adjust their holdings to stay aligned. This process creates tracking differences, the gap between an ETF's performance and its underlying index.

Tracking differences are normal and expected. ETFs typically trail their benchmark slightly, though not always. Tracking error is a related but different metric that measures variability rather than performance. It’s calculated using the daily return differences between the fund’s total return and the underlying index.

Each rebalancing requires buying and selling securities, which generates transaction costs. Some ETF types face higher rebalancing frequency: equal-weight products, for example, must rebalance regularly to maintain their target allocations. These frequent transactions can increase costs and tracking differences.

While tracking differences and tracking errors are normal, consider how often your product will need rebalancing and what trading costs those transactions will generate.

Administrative and legal costs

Administrative and legal costs represent a significant part of any ETF’s expense structure, starting with registration fees that depend on several factors. 

At minimum, expect to pay $50,000 for initial registration, but it’s usually much higher. Beyond that, fund managers are usually on the hook for around $200,000 to $250,000 in annual admin and legal expenses. Some ETFs cost even more to register and maintain.

Operational expenses include those associated with the following annual expenses:

  1.  Paying your legal fees
  2.  Paying lawyers to handle the regulatory paperwork and prospectus filing
  3.  Paying the board of directors who provide governance and oversight
  4.  Paying your trading desk to manage daily trades and redemptions
  5.  Custodial fees
  6.  Record keeping fees

These fees add up. Since growing your assets under management (AUM) takes time, ETFs benefit from substantial seed funding to create a long runway and a better chance of success.

Custodial and safekeeping costs

Every fund needs a place to house its assets, and financial institutions charge custodial fees for this safekeeping service. These fees vary significantly based on the types of assets the fund holds, with costs typically assessed against the fund’s average assets or total assets.

Foreign securities carry additional fees that domestic assets don’t face. The more specialized or complex the asset class, the higher the custodial costs typically become. As these fund fees compound, understanding the full expense structure is essential when preparing to launch a product.

However, administrative strategies can help control custodial fees. Consolidating accounts and leveraging prime brokerage relationships can reduce some of these costs.

Read about: Best practices for launching an ETF

Other operational costs to know about

Beyond core maintenance, ETFs have other operational expenses that impact the overall expense ratio: marketing and listing costs.

Marketing expenses

Every ETF needs a smart, full-funnel marketing strategy to bring in flows, but it can increase operational costs that impact the ETF expense ratio. 

A small, unknown fund will struggle to attract flows compared to a larger fund with brand recognition. Always consider your marketing and distribution budget from the start. The right index partnerships can help you keep some of your marketing expenses down.

Ultimately, your goal should be to find the right balance: spend too little on marketing, and the ETF may never gain enough momentum before its seed funding runs out. Spend too much, and the higher expense ratio could make the fund less competitive with investors.

For a fund to succeed, investors need to know it exists. VettaFi has a soup-to-nuts approach to index partnership, helping asset managers build products and then supporting them throughout the product life cycle. 

You might like: 7 ETF marketing tactics to attract investors

Listing expenses

For a product to be traded, it must be listed on an exchange. Making that happen comes with its own set of costs. Exchanges charge listing and maintenance fees for every product that trades on their platform, and those fees can vary depending on a variety of factors.

Some exchanges offer better rates for larger funds or high-volume trading, while others give discounts when you list several ETFs with them. Some newer exchanges also compete by offering lower fees, so be sure to compare options and negotiate terms that make sense for your fund’s size and growth plans.

For the NYSE Arca, issuers won’t have to pay a fee for “generic” ETFs. Non-generic strategies (such as commodity-based trusts) could see fees of roughly $10,000. Actively managed ETFs will face a slightly higher fee than passively managed funds.

Additionally, listing maintenance costs can range from $5,000 to $40,000, depending on whether a fund is active or passive. The number of issued shares matters, too, with more shares held by investors driving a higher fee.

When thinking about listing fees, remember that:

  • Every exchange is slightly different
  • Active funds pay higher listing fees than passive funds
  • Non-generic products will pay higher fees than generic products

Conclusion

Issuers need low ETF expense ratios to compete for investor attention, which means focusing first on core maintenance costs:

  • Index licensing fees
  • Rebalancing costs
  • Custodial fees
  • Administrative an legal expenses

When you have an index partner who can ease the day-to-day management of your fund, it will go a long way toward keeping your costs low or differentiating your product enough to warrant the higher expense ratio. VettaFi helps issuers build and grow products. Talk to our experts when you put together your next product.

 

“A revolution is coming - a revolution which will be peaceful if we are wise enough; compassionate if we care enough; successful if we are fortunate enough - but a revolution which is coming whether we will it or not. We can affect its character; we cannot alter its inevitability.” 

-Robert F. Kennedy
Stillness is an illusion. Change and revolution are inevitable. Even on a cellular level, our bodies are constantly changing, with old cells being replaced by new ones as we grow and age. On a societal level, ideas codify, then calcify, and then crumble as newer ideas evolve around them and take their place.
 
Asset management has seen many revolutions. The mutual fund changed investing, until it was disrupted by the ETF. The COVID-19 pandemic upended how people think about work, changing the face of distribution and ushering in a digital era.

The data revolution, isn’t just coming. It’s here.

In brief

The asset management industry benefited for the past two decades from accommodative central bank policies and a long-legged bull market. But rising interest rates and talk of recession are creating headwinds for asset managers – headwinds that will force companies to evolve to succeed. “With the collapse of a built-in bull market to support revenue growth, preexisting pressures on the asset management business have been exacerbated and will continue to put a dent in profitability. Asset managers should transform their approach to profitability. They can do this by understanding the drivers of key costs and using multiple initiatives to optimize costs, rather than just slash expenses.” 1

To succeed, we believe asset managers need to drive efficiencies and adapt across three areas: product, distribution, and data.
 
  • To survive in this environment, asset managers must do more with less and gain efficiencies across the product lifecycle.
  • The biggest key to success is unlocking the power of data. Data is critical at all stages of a business maturity model because it presents an opportunity to increase efficiency and lower costs.
  • The world is digitally transforming, and the next generation of investors are digital natives. Traditional distribution strategies are seeing diminishing returns; asset managers need to embrace digital to complement traditional sales approaches.
  • The rise in popularity of the exchange-traded fund (ETF) has led to a proliferation of product offerings in the marketplace. To stand out, asset managers must lower costs, create products that generate higher alpha, or zero in on unique investment themes.

The product evolution through product revolution

To truly understand revolutions, you must step back and understand history to see how every moment is steeped in what came before.

Once reserved for the elite, investing has become increasingly democratized over the past century. The earliest forms of investing began with the trading of various commodities and debt. The creation of the forerunner to the S&P 500 in 1923 was a massive revolution in investing. It introduced a tool to track broad market performance rather than simply individual stock performance – which provided investors with something to measure individual securities against.

1. BCG’s Global Asset Management, May 2023. “The Tide Has Turned.”

Data has become essential to all businesses. Asset managers and financial services in general have lagged behind other industries when integrating data into their sales and marketing practices. Accordingly, issuers that wish to be the winners of tomorrow need to evolve their data practices today.

How to master data for sales growth 

Consumer-facing apps, like UberEats, deploy customer behavioral data to drive revenue. By tracking the types of foods a consumer prefers, they personalize promotions and offers to match likely purchase behavior. After an order is placed, they follow up with recommendations based on behavioral data—highlighting items that are easily added to the order. In short, evolved data practices mean better predictive analytics. This translates to sales efficiency, more opportunities, and more profitable sales. Asset managers, by comparison, are now starting to leverage investor behavioral data for predictive analytics. It is not yet a widespread practice, but it is the key to unlocking success. 

According to Mckinsey & Co., organizations that leverage customer behavioral data outperform their peers by 95% in sales growth and more than 25% in gross margin.

Data-driven decision-making 

Do you agree or disagree? The financial services industry lags behind in using data to drive distribution and business growth.

A recent poll of asset managers shows that they largely agreed that financial services lags when it comes to using data to drive distribution and business growth. 

Data can provide critical insights and inform strategies that can lead firms to perform better and grow faster than firms who might not have access to or properly deploy data. Distribution teams in financial services have been slow to integrate data—creating a major opportunity for firms that move early toward data-driven decision-making. Companies that can stitch together relevant, timely data can use it to inform strategies and capture a bigger market share than companies that are haphazard in their use of data or lacking in quality data. 

While there are many exchange traded funds in the marketplace offering exposure to the theme of artificial intelligence, there is a rising need for a product that provides exposure to what Goldman Sachs labels, “the next phase” of the artificial intelligence investment, AI infrastructure. Indeed, a new investment category has emerged at the intersection of artificial in intelligence and infrastructure, attracting billions of dollars of investment capital. Some of the world’s largest investors are racing to fund the physical backbone required to power AI computations: from processors to data centers to power plants. 

While some of the early investment beneficiaries of generative AI adoption were software applications and semiconductor chip makers such as Nvidia, Goldman Sachs research predicts the next phase of the AI trade will be in AI Infrastructure. Goldman predicts companies that stand to benefit from the buildout of AI-related infrastructure will include: semiconductor designers and manufacturers, cloud providers, computer and network equipment makers, data center real estate investment trusts, utilities, and security software providers. 

The investment case for AI Infrastructure is clear.

  • Generative AI fueling explosive demand for compute and storage - The rise of generative AI and large language models (LLMs) requires unprecedented need for computational power, data storage, and a purpose-built AI infrastructure.

  • Rapid market growth - The global AI infrastructure market is projected to grow from around $135.8 billion in 2024 to between $394 billion and $521 billion by 2030, with annual growth rates approaching 20–30%.

  • Massive infrastructure spending and energy consumption - Spending on AI datacenters alone is expected to exceed $1.4 trillion by 2027. Along with data center expansion comes increased energy needs. Data centers currently consume ~415 TWh annually (1.5% of global electricity) with AI accounting for 15% of this energy consumption (62 TWh).

  • Institutional and government support - Major tech firms (Alphabet, Amazon, Meta, Microsoft) and institutional investors ( eg. BlackRock, KKR) are allocating hundreds of billions toward AI infrastructure projects. Governments are also providing incentives and funding to secure national competitiveness in AI.

Our index approach

The VettaFi AI Infrastructure Index (VFAII) tracks the performance of companies that are components of the artificial intelligence infrastructure ecosystem. To qualify for selection into the index, a constituent must be a leading player in at least one of the following six segments crucial for the continued advancement of artificial intelligence:

    1. Big data/analytics – Companies at the forefront of extracting valuable insights from data using AI to help the user make informed decisions. 

    2. Cloud providers – Companies providing access to AI processes and tools over the internet in addition to flexible and scalable data storage, platform, and application services. 

    3. Data centers and connectivity – Companies involved in managing physical facilities or providing the necessary components for IT infrastructure and data storage for AI compute needs. 

    4. Energy powering AI – Companies offering specific solutions to support the increased energy usage needed to power data centers and cloud providers utilizing AI. 

    5. Network & security – Companies safeguarding computer networks through AI-driven behavioral analytics to improve threat detection and limit vulnerabilities. 

    6. Semiconductor and computing systems – Companies designing, fabricating, or developing semiconductor chips or quantum computing systems and cognitive computing systems for AI applications.

Segment determination is based on VettaFi’s proprietary in-house research, supported by a team of industry experts (VettaFi Research Team) that maintain a unique and broad database of companies and classifications across the globe that have operations associated with the listed segments. The VettaFi Research Team examines each company’s position within their segment taking into account revenue purity and leadership. To be eligible for classification, a company’s technology, services, and/or business model must fit into one of the identified subsectors advancing artificial intelligence and its supporting infrastructure.

Constituents are float-market cap-weighted. Segment weights are capped at 20% while individual constituent weights are capped at 5% with a minimum weight of 0.50% assigned to constituents. Excess weights are distributed proportionately.

The Index is reconstituted and rebalanced on a quarterly basis in March, June, September, and December. 

VettaFi’s AI Infrastructure Index (VFAII) has been licensed in the US by Grayscale for an exchange traded product expected to launch mid July 2025. For more information about the Index, click here. 

VettaFi interviewed  Microsoft Director Gaby Marano on data and AI.

VettaFi: Tell us about your background with data and AI.

Gaby Marano: I was lucky enough to begin my journey in data and AI years ago at JPMorgan where I started as a business analyst in their Big Data innovation lab.  Then I ultimately became one of the firm’s first AI product managers and Executive Director for flagship product teams. My mandate was to lead the research, design, development, and deployment of emerging technologies and to deliver them as integrated, profitable digital solutions for lines of business. Along the way, I ended up defining a lot of the AI product development frameworks used to start embracing probabilistic systems within the legacy tech. 

Throughout that time, the data and AI tools in market were rapidly advancing — from public cloud services to computing infrastructure to machine learning to generative AI — so my role was to stay abreast of these changes, create focus on how they could impact the overall business strategy, put together complicated roadmaps with success metrics, and guide change management for adoption. I really loved my time there, but then mid-last year, I was offered an interesting opportunity to join Microsoft in the heart of their pivot to becoming an AI-led company. Now I serve as an industry advisor for financial services, partnering with investment firms and tech firms to solve the next big things for capital markets. Never a dull moment!

VettaFi: One of the challenges with businesses using data more effectively is that people have different degrees of awareness and comfort. Is there a way for more old-school industry leaders and the experience they bring to the table to incorporate data, or will there always be some philosophical tension?

Marano: I think finding the best solution will always require harmony between data perspectives and business perspectives. One example early in my career that cemented this was a late-night meeting where we had industry heads with decades of experience in the same room as skilled-but-fresh data scientists working together to forecast a market. We were all debating each other from very diverse perspectives and it was amazing to see how both schools of thought were so important to solving the problems at hand. I remember one executive who was quickly able to poke through the data analysis and explain where some underlying assumptions that only a seasoned professional would know were missing. And then the data scientists were able to pull out new trends emerging that the executives didn't expect to see. The collaboration was awesome and we were able to find clarity by the end. 

In the age of AI, we all talk a lot about how much we love to innovate, but innovation is inherently uncomfortable. When working on initiatives that will transform and disrupt, trust becomes more important than ever between data teams and the rest of a firm. People need to believe the data is credible before they will agree to make decisions based on it or change their behaviors. It takes time to earn that trust, which requires proceeding at a pace that makes sense for the organization as a whole — even when some brilliant individuals can go faster. Before charging ahead, I always recommend focusing on ensuring all the functional stakeholders believe in the vision and commit to heading in that same direction.

The state of data in asset management

VettaFi: How would you describe the current state of data for asset managers?

Marano: Well, if you look at more consumer-focused companies, I think it is revealing that asset management is behind the curve in terms of what’s possible. My music app always knows what I want to listen to next. My maps app proactively assumes where I’m about to go and gives me the quickest and easiest route there. While asset managers get to enjoy this kind of personalized intelligence and acceleration in their home life, it starts to set a higher bar for their employee and client experiences. Alternative data has been a big priority for investment teams for a while now, but finding the signal in the noise is still difficult. It is exciting to see the distribution side in particular now starting to warm up and adopt GenAI, but overall I think we still have some more ground to cover across the space at large to truly see an impact.

VettaFi: What are some of the biggest mistakes companies make when they try to integrate data?

Marano: One big misconception I see is the idea that more data equals better outcomes. We see that debunked time and time again once organizations realize the need to have your different data sets talk to each other and the complexity in getting consistent answers to make decisions. What seems like a really intuitive business question traditionally can take days or even weeks of data management and cross-team dependencies to confidently pinpoint an answer.

Then after you overcome the underlying data problem, another place I see room to grow is in reporting. Having a report doesn't always mean you have an insight. People might be getting loaded with reports in their inbox every day that they marked as spam, or they have access to so many dashboards that they don’t use. Reports and dashboards are becoming easier to spin up in isolation but harder to integrate into a multidimensional, interconnected, holistic view into a business. There’s often a ton of strain placed on the data teams to predict and prepare every version of a question that might be asked of the data. Trying to build a one-stop shop for insight is a very tough spot to be in. 

One more idea I see being challenged is that data is just your traditional view of numbers in rows and columns. That’s not the case; it is text too, especially in distribution. Our sales teams are out talking to folks all day long, and the content of those meetings might not appear to be data in the traditional sense, but there's so much we can do around different types of language data to extract that knowledge and share it across teams. It used to be a post-it note in a rolodex and now it's a call note in your CRM system, right? Well, now we’re moving to Teams meeting transcriptions with critical multimodal information that can automatically flow into sales and marketing processes, instead of requiring a ton of manual data management efforts to log what you learned.

Why AI could change everything for asset managers

VettaFi: Speaking of language data, let’s pivot to AI. What do you make of it as a tool?

Marano: I love it and I use it every day now. It's been really exciting now to see the push towards talking to massive amounts of data in a more conversational way.  With the rise of Microsoft Copilot and other “ask me anything”-type tools, the barriers to entry for data analysis are coming down quickly and it’s easier than ever to learn almost anything. I still think we’re in very early innings though.  

And back to data for a second — these GenAI chat tools are only as powerful and knowledgeable as the underlying data you connect to them. This whole craze really allowed so many more people to start thinking about data differently and come to the table to help design the future of AI-led businesses. How do we pass all of our enterprise intelligence back and forth in a momentous way where people are building off of the info from the person prior and workflows are moving seamlessly across teams in an organization? At Microsoft, we’re also focused on how agents can help fit into that puzzle where actions are taken autonomously on your behalf based on this fluid stream of endless input scenarios. 

I think AI is here and it's here to stay. Agents are also right around the corner. The more you can try out some of these newer tools, share that feedback, and help build that efficient, well-executed relay race between data, sales, marketing — and even agents — the better. 

VettaFi: Do asset managers have specific challenges and needs that data and AI could help solve? And what are the current obstacles?

Marano: The big theme I hear the most often is around how we use AI to allow employees and clients to self-serve as much as possible, so we can free up a lot of time to focus on the more important and exciting parts of the workday. In Microsoft’s recent Work Trend Index, we found that employees are interrupted about every two minutes between 9-5 and meetings outside typical work hours are up significantly year over year — creating a seemingly “infinite workday.”

If I think about why people were drawn to work as asset managers, it's typically not to spend hours perfecting the formatting and coloring of a deal doc or finding the dreaded #N/A across hundreds of Excel tabs or writing down all the action items during a long call, right? When you finish a great meeting and you feel jazzed about the ideas exchanged, you want to take action, you don't want to take notes. So how do we get the machines to do more of that mundane work and free you up for driving the next evolution of your business?  

That leads into the theme of increasing employee productivity in asset management. Again, how do we automate away the “no joy” parts of the day and just double down on what's most important to drive more positive outcomes? And on top of all of that, how do we do this in a way that is compliant? Regulations vary globally. At Microsoft, we’re constantly talking to regulators about how to meet the requirements, exceed their requirements, and do everything in a way that puts privacy and security at the center. 

So many mission-critical workflows still run primarily on Excel and email. There’s still a long way to go to unlock the full potential of this new technology and modernize asset management.

The importance of data consensus and extracting intelligence at scale

VettaFi: How can firms better optimize their data so they can use it to effortlessly support sales and operations?

Marano: Getting to a place where you have a strong data foundation takes time. Is your data available? Is it timely? Is it in an analytical system? Do you have automated quality checks in place based on expected baselines? Are you aware of your blindspots? Are you aware of your conflicting and duplicative sources? Do you have people working every day to govern and derive insights from the data sitting in its raw form? How many different names do you have for the same client? How many different definitions do you have for the same concept? Is the data being used reactively, or are you using it to predict what’s going to happen next?

There’s a lot to consider, but once you get to that proactive state where data is embedded in the DNA of your workflows and you can start to predict with some compelling degree of accuracy where the business is headed, that’s when you know it’s working. At Microsoft, we call these “frontier firms” that are powered by on-demand intelligence and achieving the type of agility that generates value faster. You can feel everything start harmonizing. But it takes a ton of time and foundational investment to get there. 

VettaFi: How do you get everyone in an organization on the same page about data?  

Marano: It starts with genuine effort and intention to understand why people use data the way they do today and why they trust or don't trust it. Some people are what I would call a “super user.” They’re ahead of the curve, often ambitious people, willing to try out a new data tool or process, and give the data team feedback. They can be a champion for evolving your data and pushing the organization to embrace the power of this new technology. Those people can be amazing to work with. They'll give you the tough feedback that you need to hear to make your product better and can be the driving force between producing something good versus great.

But then, sometimes, you have others that are less intrigued and less engaged in the process. They're not willing to invest that kind of time. They will tell you to call them when it works and when it is guaranteed to have an impact, but they don’t necessarily want to be distracted with anything until then. I think, no matter where you might personally fall in this spectrum, it's really important for your data teams and product people to spend time understanding the various data personalities and incorporating all of this into the adoption strategy. We are in the midst of a massive evolution of organizational culture adapting to the new ways of doing things so it’s important we keep all of these different mindsets at the heart of what we build. Don’t trade speed for empathy.  

 

Successful financial firms have something big in common: they’ve all cracked the code for how to brand financial products. 

The right brand strategy can make the difference between thriving and failing. But there’s more to building a brand than designing an eye-catching logo or writing a clever motto. 

So, what does effective financial branding actually look like in practice? Here’s what issuers need to know to develop a financial marketing strategy that drives results.

1. Develop a complete brand strategy

A logo may catch the eye, but it won’t close deals or retain clients.

Real brand strategy goes beyond visual design. It means understanding and explaining key brand elements, such as:

  • Your unique value proposition
  • Your core values, mission, and goals
  • Your product and services
  • The experience of engaging with your financial products and services

Define what makes you different

Your value proposition is the reason why clients choose you over competitors.

In financial services, where products often appear similar on the surface, these distinct qualities are your most valuable asset.

Ask yourself: What outcomes does your product deliver that others can’t? What expertise or approach sets you apart? If you don’t have clear answers, you’ll fail to distinguish yourself from your competitors.

Articulate your purpose

A brand strategy should articulate your values, mission, and goals, which help your product emotionally connect with the right clients. 

More importantly, your values become the criteria your organization uses to make decisions. Every time you hit a publicly announced target, you reinforce your branding and reputation.

Deliver on your promises

Your products and services can’t succeed if you don’t deliver on your promises. Even the best branding falls apart if performance doesn’t match expectations. 

Successful financial services firms create their own momentum. Every positive outcome strengthens your reputation and makes future client acquisition easier.

Perfect the client experience

Outstanding branding is easily undermined by poor execution. Every stage of the customer’s journey, from inquiries to ongoing support, will either reinforce or weaken your brand promise. 

Difficulty accessing your services, poor communication, and other pain points can lead to resentment, but a great customer experience promotes retention by keeping your clients loyal.

Brand identity

Shape your brand identity so it resonates with your target audience. Your audience’s demographics, values, and preferences should drive every aspect of your brand. 

For example, a firm targeting tech entrepreneurs will communicate differently than one serving retirees. Younger investors might prioritize environmental, social, and governance (ESG) alignment and digital experiences, while more established investors often value proven track records and white-glove service.

Regulatory compliance

Remember that financial institutions are subject to unique compliance requirements, including how products and services are branded.

Accuracy, transparency, and disclosures are extremely important, and some investors will get riled by brands that make ethical lapses or get hit with penalties for failing to follow the rules. If your brand develops a bad reputation, it could require years of damage control or a rebranding strategy.

2. Maintain consistency across all marketing materials

Your logo design, color, fonts, and typography all need to work together in concert and be consistent in all of your marketing materials. 

Here’s how to create consistent brand guidelines that make your financial products and services instantly recognizable.

Visual consistency creates familiarity

When your logo appears in different sizes, your colors shift between materials, or your fonts vary from piece to piece, you’re basically starting from scratch every time. 

Consistent branding is what gives your potential clients multiple opportunities to recognize and remember your firm. Consider American Express: their simple blue box might seem unremarkable, but decades of brand consistency have made it instantly recognizable worldwide. 

Messaging and visuals should reinforce each other

Consistent messaging works the same way as consistent visuals. Investors might overlook your tagline at first, but repeated exposure builds recognition. When your visual branding and messaging align, it creates a powerful synergy.

FedEx is a perfect example. Their logo contains a subtle arrow, while their tagline “The world on time” emphasizes speed and reliability. Even their color scheme — dark purple transitioning to bright orange — suggests motion and progress. 

Imagine FedEx using American Express blue, or Amex adopting FedEx’s orange and purple. The mismatch would be jarring because each company’s visual elements support its specific brand message.

Quality matters

Once you have a striking visual identity and smart messaging, quality is what pulls it all together. 

High-resolution images, premium printing materials, and well-produced videos simply look more professional and trustworthy than low-quality alternatives. Most clients can’t articulate why one design feels more polished than another, but they definitely notice the difference.

Mobile optimization

A final point on marketing materials that’s often overlooked: Are your materials optimized for all devices?

Your website might look stunning on desktop computers, but if it’s clunky or slow on mobile devices, you’re losing prospects who discover you while browsing on their phones.

3. Invest in content marketing

Now that you have a strong, visual brand identity that communicates your brand’s value to investors, the next step is investing in content marketing. 

Start by investing in SEO. Consistently generate useful, high-quality written content that not only showcases your brand voice but also offers high-value information your target audience will want to read — and share with others.

Of course, there’s more to content marketing than blogging. Below, we cover how you can become an authoritative voice in the financial services industry via podcasts, webinars, and videos.

Podcasts

Many people prefer listening over reading. Podcasts showcase your brand’s thought leaders while creating an intimate atmosphere that makes listeners feel personally connected to the host. 

Over time, a consistent voice builds trust and reaches audiences who might never engage with your blog content. The conversational format also allows for a deeper exploration of complex financial topics.

Webinars

Financial professionals spend most of their day on computers and need continuing education credits to maintain certifications. Webinars provide valuable learning opportunities while positioning your experts as industry authorities. 

Advisors attend for the education and CE credits, where your team will have opportunities to demonstrate in-depth expertise, connect with potential clients, and build partnerships.

Videos

Both short-form and long-form videos can put your ideas in front of audiences across different platforms. Well-produced video content performs exceptionally well on social media. 

Additionally, when your team members appear as guests on earned media like news programs or industry panels, it builds credibility and brand awareness for your brand.

4. Engage in social media

Most brands maintain social media accounts, but few use them effectively. Social media gives you direct access to your target audience while amplifying your other digital marketing efforts. 

Learn from successful brand personalities

Social media is always changing, which makes it challenging to know where your brand should focus. What works for more traditional financial companies, such as Fidelity or Charles Schwab, might not work for disruptors like Robinhood or Ellevest. 

Some of the most memorable social media successes come from unexpected sources. Denny’s transformed its brand perception through witty, real-time engagement on Tumblr, transforming the restaurant from a simple late-night diner into a relatable personality customers want to interact with. Bakery chain Greggs used quick wit and brand values to turn criticism of their vegan sausage roll into positive attention that grew their audience.

Align your social media strategy and brand values

At the end of the day, social media is a way to build trust with the audience you want. 

If you can find a way to integrate your brand values into your social media campaigns and build an audience with well-executed content, your products will always reach the right people at the right moments.

5. Manage your brand perception

Brand building is an ongoing process. Once your brand is up and running, it needs continuous monitoring and management to stay effective.

Top-notch branding aims to attract new investors by establishing your firm as a thought leader in financial services. This happens through building trust in your expertise and developing lasting client relationships. 

Here are four key areas to focus on when managing your brand perception.

Track how you’re perceived

Customer surveys, online engagement metrics, and social media reactions reveal where your brand stands with investors. 

You can’t close the gap between your intended brand image and actual market perception unless you’re willing to understand that gap honestly. Regular monitoring helps you spot trends before they become problems and identify opportunities for improvement.

Listen to your clients

The best salespeople for your products and services are your customers, who share their positive experiences with their networks. Their praise and criticism provide invaluable insights into what you’re doing right and what you need to adjust. 

Make gathering this feedback a systematic process — think quarterly client satisfaction surveys or annual relationship reviews — rather than leaving it to chance encounters.

Act on feedback

Negative feedback can be difficult to hear, but it’s also one of your greatest opportunities for improvement. If launching a new podcast host dramatically decreases subscribers, analyze what the previous host did that the current person does not. 

When you receive feedback, respond with both action and acknowledgment. Investors need to see that their input drives real changes.

Audit your brand

Sometimes you need to take a moment and really look at your branding. A great but overlooked source of input is your employees, who often provide the most honest feedback about how your brand is perceived. They know your brand better than anyone, which means they can tell you whether the image you publicly project matches the reality of the company culture.

Conclusion

Strong brands think strategically, not just visually. The financial brands that stay in customers’ minds have clear values, consistent messaging, and valuable thought leadership. 

Follow the brand guidelines explored above, and your brand will be the first to come to mind when investment decisions are being made.

Looking to make your brand stand out? Partner with VettaFi and let our digital marketing experts help you grow.

TMX VettaFi expanded its global offerings through the acquisition of ETF Stream Limited (ETF Stream), which was announced today. ETF Stream is a leading media brand for European ETFs, and the acquisition will help VettaFi better serve international clients.

"The acquisition of ETF Stream represents an important step forward in our strategy to expand TMX VettaFi's digital and analytics capabilities in the U.K. and Europe," said Tom Hendrickson, president, TMX VettaFi. "Moving forward, we remain focused on opportunities to build on our offerings and expertise to strengthen our value proposition, and better serve a growing international network of clients and partners."

ETF Stream taps into European ETF ecosystem

ETF Stream’s team of journalists covers news and provides analysis regarding the ETF ecosystem. They also host events, produce educational guides, and provide data tools to advisors. The acquisition gives TMX VettaFi extra distribution reach and is the fifth big acquisition TMX VettaFi has made. Back in February, TMX VettaFi acquired the Credit Suisse Bond Indices purchased from UBS. Another recent acquisition was iNDEX Research, which TMX VettaFi acquired in October 2024. 

TMX VettaFi, which provides indexing services as well as digital distribution, thought leadership, and experiential marketing, will benefit from ETF Stream’s coverage of Europe. ETF Stream, meanwhile, joins a growing family of TMX VettaFi companies.

"We're excited to join the TMX VettaFi family," said Sam Ridley, managing director, ETF Stream. "The combination of TMX VettaFi's resources and reach, with a shared belief in fostering innovation, will accelerate our ability to deliver value and premium products to our readers, clients, and the European ETF industry."

Read more about the acquisition in the press release.

 

The Security and Exchange Commission is updating their filing access. Given the recent proliferation and anticipated surge of ETF launches, understanding the EDGAR Next update is critical for asset managers and industry insiders.  With a September 15th, 2025 deadline, issuers looking to avoid disruptions have until September 12th, 2025 to enroll to get secure login.gov credentials and navigate EDGAR Next. This update to the SEC’s filing access is a massive operational shift that issuers need to navigate sooner rather than later. Accordingly, TMX Newsfile has published a handy guide of what you need to know before the September 15th deadline. 

What EDGAR Next aims to do

According to the article, EDGAR Next seeks to:

  • Enhance security
  • Improve account management
  • Provide new CCC assignment
  • Provide optional API access

In addition to covering what steps need to be taken, the TMX Newsfile article also helps issuers looking to understand how EDGAR Next compares to the legacy EDGAR.

Crucial steps

Preparing for this transition is critical and will require issuers to create login.gov credentials and assign account administrators. Once that is completed, the next step is to enroll via the EDGAR Filer Management Dashboard. (A beta version exists for filers to peruse before enrolling.)

TMX Newsfile can also manage enrollment, CCC, admins, and confirmations for $250/year.

Stay compliant and enroll early

The last thing any filer wants is to have to navigate through issues caused by last-minute bottlenecks. With many likely to wait until late in the summer, the SEC could see backlog and filers could experience delays. The best way to avoid this issue is to handle enrollment as soon as possible, giving yourself the time and flexibility to navigate potential challenges or obstacles.

Once you are enrolled and compliant, you need to remain compliant. TMX Newsfile Filing Lead & News Specialist Martin Francisco said, “Annual confirmation and token management are part of the new reality with EDGAR Next. We are helping clients stay organized and filing-ready–without the stress.”

Read the Newsfile article here and download the EDGAR Next enrollment form here.

ETFs have become the investment wrapper of choice for millions of investors worldwide. With record-breaking inflows month after month, asset managers are eager to launch the next generation of ETF products.

Here’s the thing: ETFs aren’t without expenses, and the cost of upkeep can be high. If your ETF operations aren’t cost-efficient, even the most brilliant strategy can fall flat. 

Ready to slash your ETF administration and operation costs? These seven expert-backed strategies will show you exactly how to do it.

1. Understand every cost involved in ETF operations 

You can’t make cost-effective choices if you don’t consider every expense. 

Exchange-traded funds need money to start up and bring to market, but don’t forget about maintenance costs. Issuers creating a new ETF via a mutual-fund conversion must navigate several expenses.

The most important thing that makes an ETF function is how new shares are created and existing shares are redeemed. Creation starts with buying securities, then bundling them into the exchange-traded fund structure. Think of an ETF’s redemption mechanism as a mirror image, with all underlying assets unwrapped into separate components.

Authorized participants, which handle the making of creation units, come with their own price tag. Yet there are several other expenses that go into getting an ETF on its feet. These include:

  • Legal counsel and compliance
  • Fund managers (ETF sponsors)
  • Fund administration
  • Marketers
  • Sales teams
  • Index service partnerships
  • Fees

  • Potential penalties (if noncompliant)

Don’t forget the costs of distribution, including dividends, interest, capital gains, and return of capital. Managing portfolio holdings and their distributions requires careful coordination with brokerage partners to ensure cost-effective execution. If the ETF strategy pivots or the fund needs to change its structure, that also comes with an administrative price tag. 

If you understand every cost and build a cost-efficient exchange-traded fund, the fund expense ratio can be lower. This, in turn, may help you attract more investors.

Many investors are drawn to the benefits of ETFs, including their easy-to-trade, tax-efficient wrapper structure. A lower expense ratio can help sweeten an already sweet deal for investors.

2. Create a powerful pricing method

Creating a powerful pricing method for your ETF offers several benefits. That’s because improved transparency leads to greater investor confidence. 

Whether you’re working with an actively managed ETF or a passive fund, portfolio managers need investors to understand how investment decisions are made. If investors feel they can look under the hood to see how the ETF is working and why, they’ll be more likely to help the ETF meet its investment objectives. Improved liquidity and higher trading volume will also make it easier for investors to buy and sell shares.

It’s also critical for market participants to engage in arbitrage activity. You want your ETF share price to align with the value of its underlying securities, which could differ from the NAV due to premiums or discounts. 

Finally, both passive and active management strategies need ways to ensure the creation and redemption processes are as cost-efficient as possible.

3. Optimize your risk management strategy

No battle plan survives first contact with the enemy, and no investment strategy survives first contact with the market. Issuers must identify potential risks early in order to reduce losses due to market conditions beyond their control. 

Optimize your risk management strategy by:

  • Making sure your ETF is operationally efficient. Inefficiency can result in lost money and additional expenses.
  • Preventing administrative mistakes. Fixing administrative errors can be costly. Reducing operational risks ensures issuers sidestep these problems and keep their overhead (and expense ratio) low.
  • Reducing operational costs. Ask yourself: Are there hidden efficiencies you aren’t capitalizing on? Are time and resources being burned at any point in the process? Don’t overlook opportunities to optimize how your ETF functions.
  • Tracking the right index. Make sure you’re tracking the right underlying index. Or, for an active ETF, that your investment management approach accounts for market volatility. Your ETF’s market price and historical returns will be pivotal for convincing investors to put money into your product. 

4. Comply with all regulatory and reporting requirements

A strong compliance strategy can save issuers from countless headaches. In the ETF market, complying with Securities and Exchange Commission (SEC) regulations is a day-to-day task. 

This applies to different jurisdictions and stock exchanges where your ETF products may be listed. You must disclose your ETF’s market price and Net Asset Value (NAV) at the end of each trading day.

The SEC could request or require many other disclosures, including detailed prospectus information and holdings data. While there are funds with varying degrees of transparency, ETFs must disclose detailed information about their portfolio holdings so investors and the SEC are aware of their daily operations.

These disclosures can seem onerous, but fines for non-compliance and failure to disclose can be extremely costly. Throw in the cost of lawyers and the reputational damages for failing to comply, and the risks quickly add up.

The reputational damage of failing to meet compliance obligations can be particularly devastating. A fast, busy newscycle can seem like a get-out-of-jail-free card for asset managers, but investors will remember these missteps and lose faith.

5. Find the right ETF index service provider

Another way to keep your costs low is to find the right ETF index service provider. 

Index service providers handle the complicated fund administration tasks that go into keeping an ETF operational and compliant.

When an ETF index service provider offers end-to-end capabilities, they can:

  • Ensure you stay compliant with all regulatory and reporting requirements.
  • Prevent market manipulation of your fund.
  • Identify and address costly potential conflicts.

Index providers are a low-cost solution compared to building these capabilities in house, but are still an overhead or benchmarking expense. 

A responsive  index service provider will  quickly get you the data you need to build the product you want. By contrast, a slow index service provider will lead you to spend more time in development, giving you fewer opportunities to improve your product before going to market.

6. Use behavioral data to find your ideal investors 

You can build the most operationally efficient investment vehicle in the world, but without the right investors, it will go nowhere fast.

Digital marketing matters for your ETF because AUM growth creates powerful economies of scale. Whether you’re launching diversified ETF portfolios across asset classes or targeting niche strategies, more assets mean lower per-unit costs and better margins.

The challenge is to find investors who want what you’re offering. That’s where behavioral data becomes your secret weapon.

ETF index service providers like VettaFi offer access to investor behavioral data and lead subscription services that reveal exactly what potential investors are researching, reading, and considering. Instead of guessing what investors want, you get clear insights into what they’re actually looking for.

Behavioral data shows you which issuers and strategies investors are actively exploring. Instead of your team wasting time on cold calls, they can connect with investors who are ready to buy. The result is shorter sales cycles, higher conversion rates, and steady inflows.

7. Stay ahead of ETF administration trends

The ETF ecosystem is in a constant state of flux, with active ETFs and passive strategies always evolving. New tools and constantly changing regulations create a steady stream of opportunities. Successful ETF issuers will be on top of the latest regulations, tech advancements, and shifting market trends. 

Bringing any ETF investment to market is a challenging endeavor, but efficient operations and exceptional partners can go a long way in helping your ETF achieve its goals.

Choosing an index service provider that can help you stay ahead of administration trends and regulatory compliance will make your ETF operations, marketing, distribution, and maintenance more cost-efficient. More cost efficiency will mean lower expense ratios, more investor interest, and better results.

Start small, scale smart

These seven strategies for cost-efficient ETF operations can take you far, but remember that even the most successful ETF issuers don’t try to do everything at once. 

Start with understanding your true costs, building fail-proof compliance processes, and choosing partners who can scale with you. This includes cutting-edge services like VettaFi’s lead subscriptions, which can help you make your marketing strategy as efficient as your operations.

Once you’ve created a solid foundation for your ETF administration, everything else becomes easier. The market rewards efficiency, and the ETF issuers with the most cost-efficient operations will have the flexibility to adapt no matter what the market throws their way.

 

In this edition, VettaFi sits down with Emily Pachuta, formerly of Invesco. The role of the chief marketing office (CMO) has evolved as companies digitally transform, embrace the power of brand, and lean into data-driven behavioral insights to drive client growth and satisfaction. No longer is the role merely “colors and fonts” or “clever copy.” Today, a CMO sits at the intersection of most functions within an enterprise, with responsibilities that span pipe, business development, sales automation, and even community-building. As a result, successful CMOs must embrace change while remaining close to both customer and product. 

Learn how CMOs to discuss driving success inside and outside their organizations, sharing perspectives on career, outlook, and motivation. 

In her former role as chief marketing and analytics officer, Pachuta set the firm’s overall advanced analytics and marketing strategy in order to accelerate business growth and strengthen Invesco’s reputation with U.S. and Canadian wealth management intermediary, institutional, and individual investor clients. Pachuta also served as the executive leader on the firm’s global distribution data, global marketing, and global digital priorities. She is a frequent media spokesperson and conference speaker about client experience, digital modernization, and the intersection of data and creativity. 

[Editor’s note: At the time of the interview, Pachuta was employed at Invesco, but she has since left.]

Jobs and Careers — From First Job to Dream Job 

VettaFi: I like talking about jobs and careers because we all spend a lot of time at our jobs or building careers, and it’s typically the root of our life satisfaction or dissonance. What do you think is the difference between a job and a career?  

Emily Pachuta, former CMO, Invesco: For me, a job is something you have to do. A career is something that you want to build and grow. A job feels more transactional in nature: money for work done. A career thrives and brings purpose, beyond the monetary.  

VettaFi: I like that. Tell me about your first job.  

Pachuta: During college summers, I worked for a law firm as a temporary word processor and assistant who would answer phones and file papers. The pay was decent, and the lawyers were extremely polite, so it was a good job. Those skills came in handy when I went to get my Master’s in film production at NYU; I put myself through the program by working overnight and weekend shifts at a NYC law firm.  

VettaFi: Do you have a dream job?  

Pachuta: That’s a tough question, because I really love the career that I’ve been able to continue to build at Invesco that spans data, analytics, and marketing disciplines. However, I am a huge hockey fan, so my dream job would be to work for the Washington Capitals, or for the NHL, to help them grow their fanbase and to make hockey fun and accessible for everyone.

VettaFi: How did you get into the marketing world?  

Pachuta: My first job in marketing was at Merrill Lynch. I had taken time off when my children were born, and when my son was two, I wanted to do something part-time. A woman from my children’s preschool worked at Merrill Lynch, and they were looking for someone to be a part-time writer and editor. I had no professional background in financial services, but I did well on the assessments, and I was hired. I still think that it was kismet — meant to be.   

It was such an exciting time, because Merrill Lynch was transforming their business model away from “Wall Street to Main Street” and toward wealth management. A new CMO — who is a mentor to this day — really shook things up and loved change. In the seven years that I was there, I experienced almost every aspect of marketing and had the opportunity to learn from amazing professionals, as well as from advisors and their clients. I was hooked on the discipline of marketing, but also the purpose and impact that wealth management and asset management can have on people’s families and lives.

VettaFi: Mentoring in marketing is particularly unique, because of how fast the space evolves. Who was the mentor who got you to where you are today? 

Pachuta: Paula Polito, who was the CMO at Merrill Lynch while I was there. She had the single greatest impact on my career; I would not be where I am today, had not been for the potential that she saw in me and the opportunities she gave me at both Merrill Lynch and later at UBS.  

[Personally], I find it very rewarding to mentor, both formally and informally. Formally, I am mentoring two people now — one at Invesco who is not in marketing, and one outside of Invesco who is a marketer. I learn so much from the conversations with these wonderful professionals.   

Successful Marketing Highlights the Why and the How  

VettaFi: What’s something you learned from an earlier job you had outside of marketing that impacts your abilities as a marketer or your approach to your current job?   

Pachuta: Finding the story and telling it in an emotional and memorable way is a critical skill for marketers. In film school, I gravitated toward making documentaries — I shot my thesis film in Moscow — because I loved how you could have an idea for the film, but, in the end, you needed to be still. You needed to watch and listen until the real story would reveal itself.   

Asset management products can be complex, and they aren’t tangible objects like consumer products. I think we tend to focus a lot on “what” the products are. But successful asset management marketing keys in on the purpose products they serve: the “why” and “how” you use them to reach human-centric goals.   

VettaFi: Agreed. Getting to the “why” and “how” is like Marketing 101 these days, but it wasn’t always that way. How was the definition of marketing different when you first entered the field, versus how you as a CMO define it today?   

Pachuta: When I first entered the field, “marketing” was either advertising or sales enablement collateral. It was also very product-centric. However, in other industries, marketing was more evolved, so I’ve always looked outside industry to anticipate where the puck is going in terms of impact that marketing can have. 

There was also a view that “B2B” marketing was different than “B2C,” which struck me as a bit odd. People are at the center of “B2B,” [which is] no different than “B2C.”   

Today, I define marketing as making an emotional connection between a brand and its customers. In asset management, that emotional connection is all about empowering confident financial decision-making… whether you are an institutional investor, financial intermediary, or individual investor. To do that, you really need to understand your client using research, data, and analytics, then take that knowledge to deliver personalized experiences that meet your client where they are. There’s still too much focus on getting clients or customers to come to the brand and not enough focus on meeting customers where they are.  

Pets and Pet Peeves   

VettaFi: I find that a bit frustrating. It’s a pet peeve of mine. It tells me brands are not truly focused on the customer. Speaking of, let’s talk about pets and pet peeves. Do you have pets?   

Pachuta: I have two French bulldogs. Our first Frenchie is four years old, and his name is Ovi. He was born the same year that the Washington Capitals won the Stanley Cup, and he’s named for Alexander Ovechkin, who is the captain of the team. Our second Frenchie is Ovi’s biological son, and his name is Gretzky for Wayne Gretzky. They have two speeds — crazy and cuddling — and we can’t imagine our home without them.  

VettaFi: Sounds like my kids. What about your pet peeves? What annoys you the most in the workplace?   

Pachuta: It can be annoying when people hold views that aren’t substantiated by data at all. Data may even refute the view, but it’s become a hard-held “truth.” Also, workplaces can make getting work done far more complex than it needs to be, so we should always be asking, “How can we move faster?”

VettaFi: I can relate to that. Old habits and ways of thinking can be hard to change. However, businesses that base decisions on data, not just instincts or experience, are 19 times more likely to be profitable. Thankfully, I’ve yet to meet anyone who does not want to be 19 times more profitable!  

Leadership    

VettaFi: What daily habits or weekly routines do you have that keep you sharp as a leader and evolving as a marketer?  

Pachuta: I’m always looking to learn from those with more experience or different points of view. I try to be conscious of where I have opportunities to improve and focus on those areas. I make time to join sessions with CMOs and leaders involved in data and analytics outside of industry. I used to think that it was a luxury, and these engagements would be the first thing to go when there was a calendar conflict, but I learn so much from these experiences that I’ve been prioritizing my participation in these conversations and counsels.  

VettaFi: What one thing has played the greatest role in shaping your leadership style?  

Pachuta: The book “Team of Teams” by General Stanley McChrystal made me think long and hard about the insufficiency of hierarchical leadership and what the role of the leader really is. Concurrent to my exposure to the concepts in “Team of Teams,” I also had a wonderful executive coach, [with whom] I learned how purposeful you must be if you are going to be the leader you aspire to be. My goal is to be a servant leader who focuses on empowering my team and enabling them to be their best selves. I assess to ensure that my intentions match my actions. For example, I will look back on my calendar every quarter to assess if I am spending most of my time in ways that empower my team and enable them to be their best selves.  

VettaFi: We just got back from Exchange, where our attendees volunteered 130+ hours and we contributed over $50,000 to the Komen Foundation, Surfrider Foundation, and Junior Achievement. Tell me about your volunteerism. How do you give back? 

Pachuta: I’ve been involved in Rock the Street Wall Street, which is a financial and investment literacy program for high school girls. I volunteer at the Stuyvesant High School program location in NYC. I’m also a board member of Sapere Aude Consortium, an organization the provides research-based internships to first-generation rising college sophomores and juniors. When I spend time with the young women in both programs, I feel quite confident that our society’s future is in good hands.  

I support these two organizations because I am passionate about seeing the wealth inequality gap narrow, which can happen with greater financial and investment literacy. I would like to see greater diversity in our industry, and that will only happen if we address the challenge across multiple dimensions, one of which is helping students who might never have thought about a career in finance consider one.  

Digital Transformation 

VettaFi: Let’s switch gears and talk about “digital transformation.” Without using the words “digital” or “transformation,” define what this term means.    

Pachuta: Making the ways that we connect with each other and our customers faster, more intuitive, and more personalized.  

VettaFi: What is something nobody is thinking about in terms of digital transformation but you are keenly aware of?   

Pachuta: I am aware that digital transformations are less about disruption for disruption’s sake and more about finding new ways to connect in faster, more intuitive, and more personalized ways. Web 3.0 and Metaverse are obvious examples of that.

VettaFi: Thinking one to five years out, tell me about your predictions for marketing and marketers? What’s coming next? How do we prepare?  

Pachuta: My prediction — and I think that this will be true in the one- to five-year window — is that AI will play a much larger role in marketing than it does today, whether that’s in content creation or the increasing sophistication of data analytics. There will absolutely be a role for people, and I feel that people who embrace this will be better able to focus on their differentiated value. Companies who embrace this will grow faster/more profitably and have deeper client loyalty, because they can anticipate and meet needs faster. [Author note: Pachuta’s comments were given before the ChatGPT hype train spun up.] 

VettaFi: What’s one headline that you expect to read in five years?  

Pachuta: “Alexander Ovechkin scores 1,000th goal.” Just joking. (Although it’s possible!)  

The headline that I would like to read is “50% of Fortune 500 CEOs Are Women.”  

VettaFi: I would like to read that too. Before I let you go, can you share with us an album, book, movie, TV series, or other creative work that brings you joy right now? 

Pachuta: Experiencing creativity live, after not being able to for so long, is bringing me joy. I’m consciously building some kind of performance into my life at least once a month. I love the spontaneity of live performance — anything can happen, no matter how much preparation or rehearsal went into it, but the performers keep going and maybe even discover something magical in the process. And isn’t that just a great metaphor for life — people plan and G*d laughs — but you might just find something new and magical along the way.

To stay connected to Emily, you can follow her on LinkedIn. 

This article was originally published April 10th, 2023 on ETF Trends.

Distribution leaders and campaign managers for asset managers face an array of challenges today as they look to get their products in front of the right customers. Though data has tremendous potential to be a guiding force for a successful campaign, it is often fragmented and siloed. Additionally, most firms lack the resources to properly wield data. They either have an abundance of data and are unsure how to apply it, or they lack the time or resources to deeply analyze it.

Fortunately, there is a way forward. The key to making data-led marketing campaign decisions is to triangulate insights from three key data points - unlock the guide below to learn more.

 

When it comes to attracting investors to your ETF, marketing is everything. You'll need a clever marketing strategy to draw their attention and boost your AUM. 

Of course, growing your ETF AUM means getting your product in front of the right investors who need it, whether you're an established ETF provider, an MLP ETF, or launching a new ETF for the first time. Once you grab their attention, you'll need to be quick and efficient about how you communicate your product's benefits.

Use these seven expert ETF marketing tips' from finding your product's niche to establishing PR opportunities and working with micro-influencers' to help you attract new investors.

1. Start with a custom ETF marketing plan

You'll need a custom digital marketing plan to generate buzz and raise brand awareness for your exchange-traded fund. This means leaning into digital ads in all the right places where investors interested in your product like to spend time. 


Define your audience

When you market your ETF online, start by asking yourself, "Who am I marketing this to?"

For example, if you have a product that focuses on commodities, you need to get your product in front of investors who are interested in alternatives. An investor who holds a clean 60/40 portfolio and sticks to the world of equities and fixed income isn't going to be interested in a commodities product. 

Your index service provider can be a valuable partner for finding new investor leads, especially if they have access to data that charts investor interest.

Use real-time data to customize your marketing plan 

Most investors research online. As investors become more aware of your brand and product, a custom digital marketing campaign can help you reach them faster and shorten your sales cycle. 

Don't let your sales team waste time on cold leads. By targeting the audience that wants your product, you can discover better market opportunities and dramatically improve your ETF's AUM. 

A big part of a customized digital marketing plan is making it, well, customized. Use real-time data insights and analytics to track your ideal investors. VettaFi's lead subscription tool does just that, connecting issuers with investors whose digital behavior suggests a match.

2. Find your niche

Your product development should start with a fundamental question: What specific investment strategy problem does this ETF solve?

In other words, what's your niche?

The answer comes down to your ETF's unique value proposition, whether you're targeting retail investors, institutional clients, or both. That could be anything from enhanced tax efficiency to superior diversification, exceptional liquidity, or protection against volatility.

Other ETF niches might include:

The most successful issuers identify real market voids, or combinations of attributes unavailable in existing products. 

By examining where current offerings fall short and understanding the regulatory landscape, you can find a niche for your ETF and offer meaningful solutions to your investors beyond what mutual funds can offer.

3. Use conferences and events to find sponsors

Event sponsorships are one of the most exciting ways to accelerate your ETF's growth, enhancing brand visibility and creating meaningful connections. The most effective event marketing comes down to two areas: industry conferences and targeted live events.

 

Industry conferences

Financial conferences like Exchange bring together the entire financial services ecosystem, creating ideal conditions for:

Live events

Conferences aren't the only live events that can bolster your ETF's marketing plan.

These other face-to-face interactions deliver big benefits that other marketing strategies can't replace:

When conferences and other live events are part of your ETF marketing strategy, they reinforce your position in the marketplace. "Sponsoring live events offers an unparalleled opportunity to put your company name and ideas directly before your target audience," said TMX VettaFi Head of Marketing Sarah Alexander. "Live events, like our Exchange conference, can foster deep engagement that digital channels cannot replicate. They also serve as an excellent medium through which to conduct business and build relationships." 

Looking for sponsorship opportunities? Talk to VettaFi about how our event sponsorship services can help you source sales opportunities, amplify your brand, and grow your AUM.

4. Create an ETF comparison tool

Adding an interactive comparison tool to your website is the best way to instantly showcase your ETF's competitive advantages while giving your potential investors real value that builds trust:

  • Design for decision-making impact
  • Implement strategic competitive positioning
  • Leverage the tool for lead generation

Remember that a well-crafted comparison tool should guide potential investors toward understanding your ETF's value proposition through interactive discovery, not passive marketing claims.

5. Look for PR opportunities

Say yes to any media or PR opportunity you can. A strong public relations strategy can expand your visibility and reach while building credibility.


Here's how to make the most of every PR opportunity.

Podcast interviews

Accept interviews on financial podcasts regardless of audience size. Even niche shows can reach the right investors and influencers who might not encounter your ETF otherwise. Your outreach strategy should target both industry-leading and specialized podcasts.

Thought leadership

Establish your team's authority by publishing thought leadership content, such as:

Media relationships

Develop a media contact database and regular outreach schedule. When something happens in the market that aligns with your ETF's strategy, reach out to financial journalists with concise, insightful commentary they can quote.

Measuring your PR strategy's impact

Track your publicity's performance by studying how it drives your ETF's growth.  By examining the right key performance indicators (KPIs), you'll quickly identify which media activities actually convert interest into AUM, so you can double down on what works and eliminate what doesn't.

Here are some tips for analyzing your PR performance data:

Install tracking

Use dedicated tracking codes for each PR initiative to measure website traffic, content downloads, and subsequent investor engagement.

Connect activities to results

Analyze the correlation between PR activities and AUM flows by implementing attribution modeling that captures:

Keep improving your approach

Review performance quarterly to reallocate resources toward the PR activities delivering the strongest ROI for your specific ETF.

6. Establish micro-influencer relationships

Micro-influencers who love your product are some of the most cost-effective messengers you can find. They speak directly to people who could be your next investors. 

Here's a quick overview of the different types of micro-influencers and how they can contribute to your marketing strategy.

Types of micro-influencers

There are many different kinds of micro-influencers in the finance world:

Financial educators who explain products to beginners

These can be social media personalities like Kyla Scanlon, who helps her Gen Z audience understand the world of finance or popular established bloggers like Michael Kitces. 

Market analysts with dedicated following

Many influencers are analysts who have built up their own audiences over time. People like VettaFi Voice Todd Rosenbluth or Bloomberg analyst Eric Balchunas are great examples.

Niche investment specialists who align with your ETF 

Niche investment specialists are influencers who cover a narrow slice of the market but tend to attract passionate followers worth tapping into. This is especially true if your product focus is in alignment.

How micro-influencers help your ETF marketing efforts

Micro-influencers are often exceptionally skilled at explaining complex financial products, making advanced concepts more digestible to a broad or beginner audience. 

Here are the advantages:

Connect with investors who prefer influencers over stock prospectuses

While plenty of investors love to pore over a prospectus, others may lose interest when they see one. Those are the people who are most likely to pay attention when their favorite influencer's latest podcast episode goes live. 

Get mentioned more than once 

Another advantage? Once a micro-influencer knows your ETF's name, they can deploy it at any time. They can also help you grow momentum by highlighting milestones in your ETF assets under management.

Boost your credibility

Finally, third-party credibility is hard to beat. While personal thought leadership may be considered biased, third-party advocates have no reason to plug your product if they don't genuinely believe in it. That credibility will go a long way to helping your product establish itself.

7. Optimize your ETF's search visibility

When people search online for ETFs like yours, you need them to be able to find you. The ETF industry is crowded and it's not always easy to stand out. Thankfully, search engine optimization (SEO) ensures your ETF is discovered when the ideal investors are hunting for their next investment opportunity.

By using SEO to make your ETF more discoverable, your product will appear when investors are actively seeking the type of solutions it provides. In other words, top-notch SEO practices turn search engines and financial platforms into your most efficient marketing and distribution channels.

Discover the best ETF marketing tactics

An ETF is a marathon, not a sprint. If you want investors to invest in your product, you need to invest in the right marketing tactics.

VettaFi can help support your product throughout its lifecycle with competitive marketing materials and other specialized services that offer deep insights for engagement and growth. 

Contact us today to learn how we can help you grow.

 

Exchange-traded funds (ETFs) have seen a meteoric rise in popularity. In 2003, there were roughly 123 listed ETFs in the United States. Today, there are nearly 4,000. 

Now that investors have a better understanding of the wrapper’s benefits, the market is poised to grow. Starting your own ETF,  which can be a valuable asset for portfolio management, is more common than ever.

If you want to successfully launch your first ETF, start by knowing the best practices. Below, we’ve written the ultimate guide to how to launch an ETF — from analyzing the market and choosing the right partners to regulatory compliance and digital marketing strategies. 

What is an ETF, and why should I launch one?

As of 2024, there are more than $10 trillion in assets under ETF management, with record net inflows north of $1.1 trillion. 

If that’s not enough to convince you to launch your own ETF, here’s a little more about why ETFs are becoming such a popular choice for investors.

What Is an ETF?

An exchange-traded fund (ETF) is an investment vehicle that pools investors’ money to buy a collection of securities, similar to a mutual fund, but trades on stock exchanges throughout the day like individual stocks. 

ETFs typically offer lower expense ratios than mutual funds, greater tax efficiency through their unique creation/redemption process, and enhanced liquidity for investors who want to buy or sell shares quickly at market prices.

They can track various asset classes including stocks, bonds, commodities, or currencies, and may follow passive strategies (tracking an index) or active approaches (managed by investment professionals seeking to outperform). 

Their transparent nature allows investors to see underlying holdings daily, while their flexible trading options include limit orders, stop-loss orders, and margin trading – tools unavailable with traditional mutual funds. This combination of diversification, cost-effectiveness, and trading flexibility has fueled their explosive growth over the past two decades.

Why Should I Launch an ETF?

Launching an ETF can be an outstanding opportunity for asset managers and investment firms. The ETF structure offers significant advantages, including operational efficiencies, potential for asset growth, and the ability to reach new investor segments that might not access your strategies through traditional vehicles.

One of the key attractions for investors is the liquidity these products offer, as ETF shares can be bought and sold throughout the trading day on a stock exchange, unlike mutual funds, which only trade once daily. Mutual funds still make up the lion's share of the managed fund industry, but ETFs now represent 33%, indicating substantial room for future growth.

In the U.S., 45% of all investors have ETFs in their investment portfolios — a number that keeps growing despite market uncertainty. 2024 saw the launch of 1,485 new ETFs, and 230 ETF products launched in Q1 of 2025. 

The rapid growth of ETFs is proof of the market’s receptiveness to new offerings and innovative products.

How to Create a Strategy for Your ETF Launch

Entering the ETF marketplace requires careful planning and strategic partnerships to stand out among the thousands of available options. Launching a successful ETF demands not only a compelling investment idea but also expertise in index selection, governance structure, and targeted distribution strategies.

Start with an Idea

If you want to launch an ETF, you need to have a product in mind. That means you need an investment thesis and a plan for what kinds of exposures the fund will include. 

Find an Index Partner

Once you’ve settled on an idea you’re happy with, you need to find an index for your ETF to track if you have a passive fund, or to act as a benchmark if you have an active fund. You’ll want an index partner who can quickly backtest, support your ideas, and help iterate on the fund design, all of which will help you find the angle you need to set your ETF apart from the competition.

Develop a Distribution Strategy

Next, consider how your ETF will govern and interact with its shareholders. From there, figure out a distribution strategy. Ask yourself:

  • How will the average investor hear about your ETF? 

  • What will drive them to put their money in your product instead of another? 

Depending on the size of the issuer, distribution strategies will vary greatly. The biggest asset managers can leverage name recognition to some extent, but smaller firms will have to think creatively about how to get the word out about the fund.

What to Think About When Developing Your ETF

Once you know your strategy, the real challenge begins. 

The art of developing an ETF is really about choosing the ETF structure that offers the best possible benefits for your fund’s goals. 

Types of ETF Structures

There are several types of ETF structures:

  • Index ETFs offer tax efficiency. These funds typically have lower portfolio turnover, which minimizes capital gains distributions, allowing investors to better control their tax liabilities.
  • ETF series trusts build on pre-existing fund structures. By joining an established trust, issuers can leverage shared operational resources, compliance frameworks, and board oversight, significantly reducing startup costs and time to market.
  • Standalone ETFs are not part of a series. This structure provides maximum autonomy over governance decisions and fund operations, though it typically requires greater upfront investment and regulatory navigation.

Selecting the right ETF structure is a major decision that will impact everything from operational costs to tax implications for your investors. 

When you eventually submit your ETF prospectus to regulators, you'll need to clearly outline which structure you’ve chosen and why it aligns with your investment goals.

ETF Transparency

You can also choose the degree of transparency your ETF will have, a decision with major implications for your investor relations and competitive positioning. 

Fully Transparent ETFs

A fully transparent ETF is essentially an open book. Investors and competitors can see what the fund holds daily, including exact securities and weightings, which builds trust but potentially exposes proprietary strategies. 

Transparent ETFs are more traditional and remain the industry standard, especially for passive index-tracking products where portfolio concealment offers limited advantages. They usually track a specific benchmark index, making it easy for investors to understand the fund’s holdings and performance targets.

Semi-Transparent ETFs

Many investors enjoy that transparency, but some fund managers worry about competition stealing ideas or front-running trades. That’s where the semi-transparent ETF comes into play.

Semi-transparent ETFs reveal some — but not all — of what is held, providing a certain amount of protection. These newer structures, which were only recently approved by the Securities and Exchange Commission (SEC), disclose holdings less frequently (typically quarterly) or use proxy portfolios that closely track performance while masking exact compositions. 

This makes them especially useful for managers with unique investment strategies, or in markets where revealing positions could make buying and selling more difficult and expensive.

Converting a Mutual Fund to an ETF

If you already have a mutual fund, you can simply convert it. This will give you all the advantages of the wrapper without having to build a new ETF from the ground up.

The conversion process requires approval from the SEC and careful planning for current investors. Taxes are very important to consider, as properly set up conversions can be tax-free and keep the fund's performance history intact. 

Since the first mutual fund to ETF conversion in 2021, many investment companies have followed this path, bringing billions in assets to the ETF structure. Investment managers should know that the process typically takes 6-12 months and may require hiring specialized lawyers who know how to handle the specific regulations for these transactions.

Other Considerations When Launching an ETF

There are many other factors to consider as you develop your ETF. ETFs hold groups of investments, so picking what goes into your ETF is important.

You can include any type of asset class or mix of investments in your ETF. Some ETFs contain both stocks and bonds, while others focus on just stocks.

Know Your Market Capitalization Size

Remember to think about your market capitalization, or the size of companies in your fund. 

Is your ETF focused on big companies, small companies, or medium-sized ones? Your fund could also include a mix of different company sizes. 

This decision will affect both your fund's risk profile and growth potential, as larger companies typically offer more stability while smaller ones may provide greater opportunities for growth.

Consider Your Sectors and Markets

Next, consider sectors and market segments. A fund that focuses on industrials is going to be a lot different than a commodities fund or a fund that focuses on high-yield fixed income. 

There is a world of opportunities and potential combinations. Finding the right way to articulate your investment thesis through how you choose market capitalization, sector allocation, and other essentials will be how your ETF differentiates itself.

Determine Your Expense Ratio

The higher your expense ratio, the more your investors will pay you per share they own. However, a high expense ratio can be off-putting to investors, so you need to determine an expense ratio that makes sense given your positioning.

Finding the Right Partners for Your ETF

It takes a village to launch an ETF. In other words, you’ll need several partners to not only get it up and running, but also maintain it.

Your ETF partners should include:

  • Authorized participants who handle creations and redemptions of ETF shares in the primary market
  • Custodians
  • An index service provider
  • A fund manager
  • Sub-advisors
  • Legal counsel
  • Transfer Agents
  • A marketing and distribution team

Be aware that when choosing an index partner, you need someone who can help you come to market as quickly as possible. A responsive index partner can backtest rapidly, helping you discard ideas that aren’t working so you can succeed faster. “"The majority of ETFs will fail to garner over $250 in AUM,” said VettaFi’s Chief Product Officer Brian Coco. “This is why having an index partner that is invested in product success and that can help with marketing is important. You need to give yourself the best possible chance of success."

It goes without saying that you should always vet your potential partners. As an ETF sponsor, your reputation will be tied to the performance and reliability of these service providers. Ensure their goals align with your own investment goals so they can help you bring your ETF investment strategy to life.

ETF Regulatory Requirements and Filing

Prospective ETF managers must submit a fund plan to the SEC. You can find the necessary documents and forms on the SEC website, but make sure you consult your legal team before submitting anything.

SEC approval is required before you can launch an ETF. Whether you're launching an actively or passively managed fund, the SEC must still receive and process your paperwork. Typically, the approval process takes four to six months or longer.

Once the SEC approves your ETF launch, you will still be responsible for following all SEC rules. These include, but are not limited to:

  • Transparency regulations: You’ll need to provide daily portfolio information on your website. In addition, you’ll need to make certain disclosures about your ETF's trading process. If your ETF holds custom investment baskets, they may also be subject to specific policies.
  • Record-keeping regulations: Your website must track your net asset value, market price, and any premium or discount from the previous trading day.

Keep in mind that the SEC occasionally updates requirements to address market changes and investor protection concerns. Working with service providers who specialize in ETF compliance can help you reduce your operational burden and avoid costly mistakes.

Marketing, Distributing, and Operating Your New ETF

Making your new ETF stand out from the competition can be a daunting task. If your fund does something similar to what another fund has already been doing, you’ll need to find a unique angle to ensure your ETF captures the attention of investors. 

Being first to market with an idea is powerful, but that doesn’t mean there won’t be competition. Stand out by outperforming or having a lower expense ratio. 

Digital Marketing

Digital marketing and distribution are now the norm, and most potential investors research new ETFs online. Ensure your digital presence clearly communicates how your fund provides diversification benefits within an ETF portfolio. 

Investor behavioral data can help you find high-quality leads and get your product in front of them at the perfect time. 

Tethering your product to current market events and news is another excellent way to move the needle and set your product apart from the rest. 

Don’t forget that successful products tend to use a full-funnel marketing approach. They gradually build top-of-funnel awareness, leveraging data and analytics to move lower-funnel prospects toward conversion. This is especially important for active ETFs that need to communicate their value proposition beyond simply tracking an index.

Operational Costs

Determine how much your operational costs will be, and how much seed capital is necessary to meet those costs. 

Finally, make sure you have a plan for the first year of operation. Draft a break-even analysis, as well as growth projections.

Now That You Know How to Launch an ETF

Launching an ETF is a huge undertaking. But with the right partners and careful planning, you can bring your unique investment idea to the market and illuminate a previously invisible opportunity for investors.

Have a killer idea for an ETF but need the right tools to get it in front of investors? Reach out to VettaFi now.

Picking the right index service provider can make or break your new ETF product. 

With nearly 4,000 ETFs competing for shelf space in the United States alone, in today's competitive ETF ecosystem, issuers need an ETF services partner as invested in the asset growth of the product as they are that can help them design and maintain their index as an index provider.

ETF issuers have different needs, but some approaches lead to better outcomes than others. You need to know what works to avoid the common pitfalls that can derail new ETF launches. 

Here’s everything you need to know to find the right ETF index service provider, from what type of evaluation criteria to use to how to spot red flags before you commit.

What ETF index service providers do

Traditionally, ETF index service providers calculate and maintain market indices for exchange-traded products. 

These indices can be licensed and are frequently used for two purposes - benchmarking to measure investment performance, or for a rules-based investable product to track. A good index partner will accurately track corporate actions, including mergers, stock splits, and dividend payouts in real time and adjust the underlying basket accordingly. 

In recent years, index providers have worked with ETF issuers to create unique products that offer specific exposures and index methodologies. Creating custom indexes has been one way for issuers to differentiate from their competitors, many of whom are likely licensing legacy-type indices (e.g., beta, Value/Growth styles, etc.) from “the big four” index vendors: Bloomberg, FTSE Russell, MSCI, and SPDJI.

A good index partner can reflect a product view through a unique methodology used to select specific securities. Ideally, they can also find creative approaches to complicated problems and think outside the box. They must be organized and efficient enough to competently track, maintain, rebalance, and comply with regulatory guidelines while working with authorized participants. 

Additionally, a good index partner provides transparency about their process and is responsive and communicative with the ETF issuer. Because issuers must manage and operate the fund, they need an index partner who can quietly and effectively handle the indexing, which includes methodology development and calculations.

How does an ETF index service provider influence performance?

ETF index service providers can impact many performance markers for an ETF. Notably, they are responsible for any tracking errors that arise through index design or turnover. 

Their services complement fund administration efforts, and their chosen rebalancing frequency and reconstitution schedules can impact an ETF’s net asset value calculations and bottom line. The methodologies used to create the investment universe of a given ETF index can also impact ETF shares’ overall performance, including total cost of ownership, second market liquidity, and trading costs. 

A fund’s performance is ultimately on the management team and any portfolio management decisions, but having a capable index partner can prevent unforced errors and strengthen results. Many index partnerships begin and end at an agreement to license an index, but a good partner can go further and help throughout the full lifecycle of the product.

Key criteria when choosing an ETF index service provider 

Before choosing an ETF index service provider, investment management firms should consider the following: 

  • What is the index provider delivering to the issuer for their licensing fees and pricing? 

  • What data, analytics tools, and complementary fund services are offered by the ETF index service provider?

Backtests are a critical component of building a smart product that innovates for investors. Seeing how a product would have performed in specific circumstances can let fund managers understand and anticipate how investors will deploy their products, and where there could be opportunities or challenges given market conditions. 

Many index service providers will need time to turn around a backtest. A faster partner can help fund managers iterate and evolve their product ideas. "The Index Product development cycle is iterative by nature,” VettaFi’s Brian Coco said.  “Achieving success requires failing faster." Quick turnaround times on backtests can allow issuers to test and discard ideas rapidly as they work toward meeting product goals.

Finally, when choosing the right index partner, ensure that you:

  • Use methodologies that are transparent, well documented, and support required disclosures.

  • Know the structure of the index governance and committee independence. 

  • Understand the terms of any licensing agreements.

Questions to ask potential ETF index partners

There’s a lot to consider when choosing a service provider.

Asset managers should ask potential partners these seven questions to help them decide if the partnership will be a great fit.

What unique data sets so you use? 

If you want to build a product that stands out, having access to unique data sets can help make that happen. Index providers with unique data sets can help issuers build products they can’t build on their own.

How can your index help me improve my investment offerings and meet my investment objectives? 

Listening to an index partner explain why they do what they do, and what they believe their value proposition is, can help you assess if they can meet your needs.

What index-specific support will you provide throughout the index-licensing relationship? 

Given how crowded the ETF field is, any differentiation can be an asset. Many index providers only offer basic levels of support and become the “set it and forget it” type of financial services. However, a good partner will be responsive and have digital marketing capabilities to help the fund grow its AUM.

How does your governance committee handle methodology changes, and what is the communication process? 

Clear communication is critical in any enterprise, and ensuring an index partner is transparent about methodology changes can help keep the partnership aware and aligned..

What is your index reconstitution process, and how do you reduce market impact? 

Any given product will express a market view and influence allocation decisions. Accordingly, an index must constantly adjust and iterate based on current market realities. 

How do you ensure consistent index calculations when the market experiences a disruption? 

A good index partner will have a playbook for dealing with all sorts of market volatility and make well-considered, data-driven decisions.

Common pitfalls when choosing an ETF index service provider

Asset managers can run into some of the following challenges when choosing an index partner. 

Two common pitfalls to avoid

The number-one challenge when choosing an ETF index service provider? Failing to thoroughly examine an ETF index service provider’s index construction methodology. 

Misunderstanding their methodology can create issues for the fund manager and greatly impact your investment strategy.

Another extremely common misstep is to choose an index partner who barely collaborates. Once a product has been built, you want an index partner who will throw their all into making the product launch a success. 

What else should you consider when choosing a service provider?

Issuers must walk a line when they consider ETF index partnerships. On the one hand, they need to make sure they are partnering with someone who understands the specific market sector their product will be built around. On the other hand, you also need an index partner with a wide range of indices. 

Suppose you’re building a specific equities product for one sector of the domestic market. In that case, you want an index service partner who deeply understands that market and has indices that include fixed income benchmarks and international exposures. 

A wide range of indices indicates better data sets and enhanced capabilities. However, they also need to have some measure of understanding of the specific market segment you are trying to capture. Finding a partner who is both a specialist and a generalist can be challenging, but it’s not impossible. 

Additionally, issuers will want to make sure that there are no conflicts of interest with how an index is governed, including relationships with subsidiaries. When looking at methodology and construction, you also want to be on the lookout for concentration risks or opaqueness on the part of the potential ETF index partner. 

Conclusion

Launching a new ETF is a high-stakes event. Historically, ETF index service providers have been checked out of the process. That approach made more sense in an era when the ETF was a new wrapper, there was less competition,and requirements of the indices needed were much less complex, mostly broad, beta datasets.

But now, ETFs are a dominant force in the ETF market and competition for AUM is fierce. An index provider must be committed to the success of the products using their indices.

Given the complexity of the ETF ecosystem, it’s critical to find a suitable ETF index partnership. Issuers need responsive, flexible index partners who can contribute to a product’s success on multiple fronts. 

There’s more to it than just licensing a benchmark, and the issuers that take the time to find a real partner will position their ETF business to take a bigger portion of market share and improve the odds that the product will capture AUM and grow.

VettaFi offers a unique suite of index services within the financial services industry, with the ability to be a partner throughout the product’s lifecycle. Learn more now.

 

Investing is a long-term game, according to conventional wisdom. But as issuers look to grow their AUM, it is important to understand what is happening today. Investors want to know why one product is better than thousands of other products they could invest in. You can make a cogent case for the product’s investment philosophy and back it up with all of the data, stats, and projections in the world, but for many investors that’s not enough. They need to understand how it fits into the world today, as well as long-term.

Investors are constantly consuming finance media. What stocks are down and which companies are up might ultimately not matter in the long term, but it does matter today. And today is when you want investors to invest in your product.

Tethering your product to current market events can help demonstrate the value and utility of your product. Of course, getting third party media institutions to spill ink or provide soundbites about your products can be a challenge. This is why third party sponsored content could be a critical early- to midfunnel tactic.

What is sponsored content, exactly?

There are many ways to market and advertise a product. Based on where a prospect is in the marketing funnel, every tactic has a purpose. Before we dig into what sponsored content is, it is important to note that it is different from a direct advertisement. A billboard advertising a restaurant might not provide many details about the restaurant, but it does give drivers passing by a touch point. They might not be hungry, but now they know the name of the restaurant. 

In a similar fashion, issuers will often put up ads that mention tickers or, if on the internet, link back to landing or product pages. For many potential clients, a direct pitch can be offputting. Financial advisors managing large AUM know that issuers want their business and can be guarded against direct first-party appeals. 

But sponsored content presents analysis from a third party. This offers a host of advantages for an issuer. For one thing, a third party is not beholden to the same compliance standards. Because they have their own authorial perspective, they can more seamlessly fold in ticker references and mentions. 

Websites like ETF Trends offer ETF issuers an opportunity to sponsor channels. These channels operate like a micro-site to present financial news and information, while also being a home to product endorsements. Not only does this help with top-of-funnel ticker and brand recognition, but the content itself is useful for getting prospects further down the funnel to understand how and when a product might be used in their portfolios. It can showcase a product without being a direct pitch. 

Today, and today, and today

As much as investors are thinking about tomorrow, intellectually, emotionally, and experientially, it is always today. Today matters. Which means issuers need their products and services to not only fit into long term narratives, but make sense of the moment, particularly if a market moment is highlighting the need for a product. 

For example, in 2024, energy started the year as the strongest performing sector in the market, but then fell off. When October rolled around, a geopolitical crisis between Iran and Israel suddenly altered the performance of the energy space. Having news and analysis that walked through the events leading up to the crisis and unpacking how the crisis could impact energy investors gave Alerian’s midstream funds a moment to shine. If investors had the market view that the crisis could be ongoing or worsen, they now understood that investing in one of Alerian’s MLP funds could give them more exposure. 

Even if investors were to take up the opposite view, this kind of coverage and the ability to tether a product to a recent news event can linger in a reader. An investor who thought the crisis would be mitigated and energy would fall again might not invest right away. However, if their perspective changes in the future, they now understand MLPs to be an energy exposure option amid times of geopolitical strife.

The ongoing active management surge

Looking a bit more at the present, the Trump administration, through its tariff policy, is creating market uncertainty. The world is pivoting away from the U.S. dollar.

In a broader sense this means that now, more than ever, asset managers need to contextualize products amid current events. Investors are seeking guidance on what to do. This specific story itself, though, has ripples across a variety of sectors and products.

T. Rowe Price has successfully leveraged sponsored content to stay ahead of the tariff news and remind investors of the importance of active management. In this article, VettaFi’s Peters-Golden writes, “Active management can help a fund adapt to tariff news. For example, an ETF’s fundamental research capabilities could help it better predict which firms will be more or less harmed by tariffs. Rising supply chain costs may impact certain firms more than others. At the same time, fundamental analysis can also help identify firms with healthier balance sheets.” He then pivots to describing specific T. Rowe Price funds.

International investing and the value of sponsored content

U.S. stocks have had an historic dominance in recent years, but nothing lasts forever. Though many analysts have noted that large-cap U.S. companies might be overvalued, it's hard for that kind of analysis to stick when the market news is just a line going up on large-cap performance. The Magnificent Seven and FAANG before them were juggernauts.

Issuers with international products had a more challenging time, but current events have helped them articulate their case. VettaFi’s Karrie Gordon, writing on the China Insights channel sponsored by KraneShares, noted in a March 19th article that “Economic policy concerns, trade wars, recession risks, and more plague U.S. markets. Meanwhile, in China, another round of policy support announcements and major earnings beats from China internet giants sent stocks surging in March. The KraneShares CSI China Internet ETF (KWEB) provides exposure to the category and is up 29% year to date.”

Demonstrating the practical applications of a product helps investors understand how they could use it. Seeing a product perform well amid specific news events can help prospects move further down the funnel and begin to consider an allocation.

Playing offense and defense

Sponsored channels are also terrific vehicles for helping investors think about complex stories in a way that can be beneficial to a sponsor. They have a capacity to both play offense by demonstrating investor use cases and defense by helping investors see the upside amid troubling news. 

For example, back in 2023, international investors had questions about the Biden administration's new rules on China investments. This piece from Peters-Golden helped alleviate concerns investors might have about how these rules could impact their China exposures. Peters-Golden wrote, “Despite short-term pain from these headlines, however, analysts at KraneShares believe there’s a silver lining for investors interested in China. Yes, the U.S. has implemented a range of regulations on U.S. investors and companies’ ties to Chinese tech sectors over the last few years. However, KraneShares sees this latest drop as a positive for investing in China. Per the firm’s recent note, it believes these new regs could be the ‘final guardrails’ in the U.S.-China trade and investment relationship. In such a scenario, investors may be freed from concern about further, looming regulations.”

Set yourself up for success

Issuers looking to scale their products and share their investment ideas need clear, compelling messaging. But that’s not enough. Like a well-constructed portfolio, marketing strategies should be diversified. Sponsored content can enhance proprietary materials and offer another effective way to connect with the investors who matter most.

Looking to be top of mind for investors and contextualize your products within the broader market environment through sponsored content? Learn more here.

 

While global defence spending was already growing, focused on the modernisation of defence capabilities and NATO’s spending target of 2% of GDP, a large-scale conflict on EU borders was a wake-up call for NATO and its European members. Today, the war still rages on, and after a contentious meeting at the White House with Ukraine President Zelenksy, the U.S. paused all military aid and intelligence to Ukraine, with far-reaching repercussions. A new European era of defence was ushered in, with a resolve to be less reliant on the US as an ally with a commitment to European rearmament and autonomy. The EU Commission has devised a “ReArm Europe/Readiness 2030” plan the tenants of which were published in a White Paper for European Defence and the ReArm Europe Plan-Readiness 2030 on 19 March 2025, outlining its 5-year plan.

The EU white paper offers solutions to strengthen the defence industry by closing capability gaps and ensuring long-term readiness. It also suggests ways for Member States to invest heavily in defence, buy necessary equipment, and support the industry’s growth over time. The plan calls for €800 billion of investment for a massive ramp-up of defence spending.  It will also include a €150 billion credit facility, the Security Action for Europe (SAFE) plan, that will help fund this investment. By activating the national escape clause of the Stability and Growth Pact, EU members will be able to increase defence spending an additional 1.5% of their GDP, equating to 650 billion euros over the next 4 years.

Key areas of action explored in the piece include:

  • Closing military capability gaps in areas such as air and missile defence, artillery and munitions, and drone and counter-drone systems.
  • Supporting the European defence industry by buying European first with the goal of 65% being sourced from the EU, Norway, or Ukraine. 
  • Deepening Europe’s defence capabilities with development of future of defence technologies like AI, quantum, and cyber defence.  
  • Enhancing Europe’s readiness for worst case scenarios, by stockpiling, improving military cooperation, harmonization, and mobility across Europe.  
  • Continued support for Ukraine and what is being called a “Porcupine Strategy” aimed at deterring further Russian aggression. 

The benefits of sponsoring and attending industry events and conferences can be highly impactful to your bottom line. They offer a chance to connect to clients in-person, share thought leadership, and supplement your digital distribution efforts with face-to-face business opportunities. Additionally, they are terrific content vehicles. Photos, social media posts, and think pieces can all be created and deployed before, during, and after a big event. 

But many issuers who opt-in to sponsoring a conference fail to take full advantage of the opportunity. Think about the exhibit halls of most conferences. Have you ever seen someone manning a booth and just scrolling on their phone? A presence at a conference is always a net gain. Simply showing up has benefits. But conferences present a host of opportunities to sponsors. If you are spending the time and resources to create swag and sponsor an event, you should squeeze every ounce of value out of it that you can.

The recent Exchange conference in Las Vegas showcased several asset managers who deeply understood how to make the most of the event.

Tap into the moment

Conferences exist at specific points in time. Most points in time are associated with broader cultural forces. Tying an activation to something that is happening, even outside of the world of finance, can deepen the activation. A shared experience is humanizing, after all. Exchange 2025 happened in March, which means March Madness is top of mind. 

State Street Global Advisors set up a Connect Four basketball exhibit on the lawn at the conference venue. Attendees could approach, grab a ball, and try to connect four shots in a row on a grid. This became a popular spot for networkers who just connected to deepen nascent bonds through competitive play. With State Street’s branding all over it, the activation facilitated conversations, provided attendees with social media fodder, and spoke perfectly to a specific event happening at the same time as the conference. This activation was rooted in a simple idea that accomplished a lot through being tethered to something that people were already interested in. Because March Madness is a phenomenon, social posts about the activation were more likely to see traffic boosts and the impact of the activation was enhanced as a result.. State Street also had speakers at the event, and the presence of thought leadership mixed with a clever activation inspired good will among attendees. All it took was a little planning in advance and understanding of what conference-goers might be interested in doing.

Tap into the location

Conferences exist at specific points in time. Most points in time are associated with broader cultural forces. Tying an activation to something that is happening, even outside of the world of finance, can deepen the activation and bring a timeliness element to the activation. A shared experience is humanizing, after all. Exchange 2025 happened in March, which means March Madness is top of mind. 

The Las Vegas Grand Prix is a big deal in the Formula 1 world. Formula 1 has seen increasing popularity amid a Netflix documentary and growing fan base. CF Benchmarks put a race car directly on the floor of the exhibit hall, creating an activation that resonated with the host city for the conference. The presence of the vehicle on the exhibition floor became a natural conversation starter for attendees and was impossible to miss. 

When in doubt, lean into basic needs

There are no doubts that creative, unique event activations can move the needle. In Exchange 2024, Grayscale set up a drone laser show that dropped jaws and had the entire conference talking. But not every activation needs to incorporate out of the box thinking or have the budget for an elaborate drone laser show. Asset managers can earn tremendous good will simply by thinking about the basic needs of conference attendees. 

Every conference runs on coffee. Conferences are also hotbeds of happy hours, dinners, and late nights, so there is a premium placed on good coffee. Even people with relatively light evening schedules and plenty of down time need a pick-me-up. Lazard responded by curating an entire coffee bar, complete with seating and tables, in the exhibit hall. Now, the conference itself was also offering urns of coffee, so Lazard understood their café needed to be next level. Crack baristas quickly and efficiently put together top tier coffee beverages for anyone walking by at any time, creating a networking hub within the networking hub that is the broader conference. Anyone who walked the exhibit hall at Exchange 2025 probably noted the constant traffic near Lazard’s cafe. Lazard was also trying to generate hype for a new product launch, and having one of the most consistently crowded booths on the exhibition floor helped reinforce that buzz.

Nuveen had a similar activation. Understanding that happy hours are a big deal at professional conferences, they set up a “muni-rita” bar to cleverly showcase their muni products and give attendees an easy-to-get-to happy hour spot. ROBO Global, meanwhile, had a similar idea, programming a robot arm to mix drinks for attendees. Both of these activations spoke to basic needs among attendees and provided plenty of good attention to the brands that deployed them.

Work everything you have at the maximum level

You don’t have to have bottomless spending to have a successful conference experience. Sometimes all it takes is being present throughout the lifecycle of a conference.

Conferences are more than a couple of days on a calendar. They are months of lead up and preparation. They are also their own aftermath. Before a conference, you can be setting up meetings, inviting prospects, and putting yourself in position to succeed. After the conference you can be active on social media, sharing reflections, and taking every possible opportunity to put your product, ideas, and people in the spotlight. 

X-Square Capital came to Las Vegas from Puerto Rico. Their purpose in going to Exchange was to share their Triple Tax Exempt muni fund with a broader financial advisor audience. 

In advance of the conference, they booked interviews. At the conference, their team worked. They talked to everyone they met. They handed out swag. They took every opportunity they could to talk to people, share their ideas, and put their best foot forward. Showing up can be enough, but truly showing up means embracing possibilities and being an active partner with the conference host. Many firms are content to just let their branding do the work, but the firms that get the most from any conference are the ones who put in the effort on the floor. X-Square certainly did that at Exchange.

Set yourself up for success in 2026

At the end of the day, all of this comes down to preparation. Committing to going to a conference early gives you time to plan and prepare. Making a smart or useful activation happen can lead to a huge ROI. 

As asset managers are crunched for time and resources, it can be hard to give any task its due. But taking the time to have a smart conference plan and then executing on that plan can pay huge dividends. There is an opportunity cost to any event. You are spending money to get your logo in front of prospects and take advantage of all that a conference has to offer. As discussed, even phoning it in can make the opportunity cost worthwhile. But why phone it in when, for just a little bit more effort, you can get exponentially more dividends out of your sponsorship?

Interested in setting yourself up for conference success? Speak to our experts.

While broad energy ETFs have largely seen outflows over the last two years, midstream or energy infrastructure ETFs have enjoyed solid inflows. Often, these will be categorized as MLP ETFs. It is a simple delineation among the more than 4,000 ETFs. However, most “MLP ETFs” only own up to 25% MLPs.

For investors allocating to energy infrastructure, it is important to understand that there are two types of MLP funds with notable differences. This note explains MLP funds, their use cases, and other ways investors can access the midstream space. Investors are encouraged to review prospectuses and fund materials for more detail.

The two types of MLP funds.

Investors may prefer to access MLPs through funds to avoid the Schedule K-1 that comes with direct MLP investment. There are two types of MLP funds, whether looking at ETFs, mutual funds, or closed-end funds. Both types issue Forms 1099 but have other important differences in tax treatment. Specifically, any fund with more than a 25% weighting to MLPs is taxed as a corporation.

On the other hand, funds that own up to 25% MLPs are structured as RICs. Most funds registered under the Investment Company Act of 1940 (often called ’40 Act Funds) are RICs. RICs are considered pass-through entities and aren’t subject to corporate taxes.

MLP-focused funds taxed as corporations.

Among midstream investment funds, there is a small subset that predominantly own MLPs and are taxed as corporations. The number of these MLP-focused funds has declined over the last several years (read more). There are only three MLP-focused ETFs structured as corporations. The largest of these is the Alerian MLP ETF (AMLP). AMLP is the second-largest energy ETF.

MLP-focused funds tend to appeal to investors who are looking to maximize income. Historically, MLP funds structured as corporations have retained the tax characteristics of MLP distributions, including the potential for tax-deferred return of capital (read more). For longtime holders, the tax treatment of distributions from MLP funds is typically return of capital or qualified dividends, but investors should consult fund documents.

MLPs typically offer higher yields than midstream corporations. The Alerian MLP Infrastructure Index (AMZI) was yielding 6.8% as of March 27. AMZI is the underlying index for AMLP.

Additional detail for MLP funds taxed as corporations.

Due to their taxation as C-Corps, MLP-focused funds can experience tax drag, and fund performance would be reduced by the taxes accrued. There can also be times when the fund’s tax drag is negligible due to past losses.

An MLP fund, taxed as a corporation via its partnership holdings in the underlying MLPs, will accrue deferred income taxes for any accelerated deprecation taken by the MLPs and for the unrealized net gain on its underlying holdings. Deferred income taxes are based on the corporate tax rate (currently 21%), plus a few percentage points for state taxes.

For example, if an index of MLPs gains 10%, the ETF tracking that index may only gain 7.7% if it is accruing for a deferred tax liability (DTL). On the other hand, a DTL can act as a buffer if equities are falling. In that scenario, a 10% decline in the underlying MLP index would equate to only a 7.7% decline in the fund as the DTL shrinks (similar to adding an asset). This simplified example is depicted below.

Deferred tax liability on hypothetical MLP fund performance relative to its underlying basket

There can be times when tax drag for MLP-focused funds is minimal due to past losses from holdings declining in value. In simple terms, past capital losses can offset capital gains. Fund-level taxation adds complexity, but the attraction of MLP-focused funds has historically been their generous yields.

Midstream ETFs structured as RICs.

Most midstream funds, including ETFs, are structured as RICs and only own up to 25% MLPs. There are around a dozen midstream RIC ETFs, encompassing active and passive approaches. Alongside MLPs, these RIC ETFs will typically own U.S. and Canadian midstream corporations. Some funds have sizable allocations to utilities, which tend to have lower yields and greater interest rate sensitivity relative to midstream. Because MLPs are only up to 25% of RIC-compliant “MLP ETFs” by weighting, it is important that investors understand what is in the other 75% of the portfolio.

An investor may prefer to get midstream/MLP exposure through a RIC if they are primarily seeking total return. RICs do not have the potential tax drag associated with MLP-focused funds taxed as corporations but also have lower yields. The Alerian Midstream Energy Select Index (AMEI), which caps MLPs at 25% and also includes U.S. and Canadian midstream corporations, was yielding 5.1% as of March 27. AMEI underlies the Alerian Energy Infrastructure ETF (ENFR). The 10-year average yield difference between AMZI and AMEI is ~200 basis points.

Investors may also prefer RIC products if they desire greater diversification. RICs must adhere to diversification rules, while MLP funds structured as corporations are considered nondiversified. Funds with corporations and MLPs provide broader exposure to the midstream universe.

Investors may also want to own familiar corporations like Kinder Morgan (KMI) or Williams (WMB) that no longer have related MLPs. Additionally, funds with U.S. midstream corporations tend to have more exposure to natural gas infrastructure, which has benefited from a strengthening outlook for North American natural gas demand (read more).

Other ways to access the midstream space.

Often, listings of MLP ETFs will also include exchange-traded notes (ETNs). There are currently five energy infrastructure ETNs. The largest is the JPMorgan Alerian MLP Index ETN (AMJB). The main appeal of ETNs is little or no tracking error. Midstream ETNs also issue Forms 1099. ETNs tend to be most suitable for investing in tax-advantaged accounts, because their coupons are taxed at ordinary income rates. When using ETNs, investors should be comfortable with the credit risk of the issuing bank (read more).

For international investors, there are two UCITS ETFs that provide exposure to North American energy infrastructure. For context, UCITS is a European regulatory framework intended to protect investors. The Alerian Midstream Energy Dividend UCITS ETF (MMLP LN) tracks an Alerian index that includes U.S. and Canadian midstream corporations with an allocated exposure to MLPs through AMJB.

Bottom line:

Midstream investors primarily seeking income will likely prefer a fund that predominantly owns MLPs. Investors who are more focused on total return and broad midstream exposure will likely prefer a RIC-compliant midstream ETF.

Vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP, MLPB, ENFR, ALEFX, and MMLP.LN, for which it receives an index licensing fee. However, AMLP, MLPB, ENFR, ALEFX, and MMLP.LN are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing or trading of AMLP, MLPB, ENFR, ALEFX, and MMLP.LN.

This article was originally published April 1st, 2025 on ETF Trends.

Last month’s Exchange conference brought together financial advisors, asset managers, and financial professionals for a face-to-face experience. Experts like Dr. David Kelly offered in-depth market analysis, providing attendees with their knowledge and deep understanding. Geopolitical expert Ian Bremmer shared a sobering outlook on the implications of broader global politics and investing.

There were sessions devoted to practice management and plenty of solid, concrete information circulating to make the conference more than worth the opportunity cost of attending. But what Exchange 2025 truly revealed was the importance of the human side of finance. 

Take a walk on the human side

Retirement expert and author of “Your Best Financial Life,” Anne Lester, led a powerful discussion keyed into helping advisors connect to their clients on a human level. “I think it’s challenging for people who spend their lives in a compliance-controlled environment, surrounded by numbers and graphs sometimes to remember that our clients are human beings,” Lester shared.

Jennifer Morgan started her keynote dancing to Pitbull and spent a sizable amount of time off the stage and in the audience, connecting directly with attendees. Aptly, her session was titled “Escape the Sea of Sameness.” Morgan argued that relationships are increasingly important for financial services professionals. In a crowded marketplace, it’s one of the few ways you can stand out. “If you build a relationship, business can come later,” she noted.

Put the spreadsheets down

Lester and Morgan weren’t the only ones prodding attendees to exit out of Excel and take in the people around them. Shaping Wealth’s Neil Bage and Brian Portnoy moderated a workshop devoted to “human first” financial planning. “What got us here isn’t going to keep us or sustain us going forward,” Bage said ahead of the workshop. “We need to pivot in the way we engage with the people we are here to serve.”

Bread’s founder Kyla Scanlon also brought her unique talents to Exchange. Again, the focus was on humans. “I try to center people and the economy because people are the economy, at the end of the day,” Scanlon shared when discussing her session on The Road to Exchange. Scanlon is known for bringing economic information and learning directly to her Gen-Z audience over social media. 

Products in the modern world

Like any industry, finance offers products and services to customers. An asset manager creating a unique ETF and getting investors to put money in it might be more complicated on paper than a diner selling a customer a cup of coffee, but at the end of the day, it all comes down to transactions.

Advertising has evolved as channels of communication between people have changed and developed. In the 1950s, Brylcreem advertised in black and white on TV that “a little dab will do ya” in a minute-long spot airing on prime time. By the aughts, restaurant chain Denny’s was advertising via an absurdist Tumblr account that replied to social media posts — often in the middle of the night.

The pivot to being human

These are all disparate threads that point to a common phenomenon; namely, that there is a widespread need for actual connection and authenticity across all industries. A social media account from a brand directly selling a product feels inauthentic and forced. The genius of the Denny’s Tumblr was that it had a very human voice that reflected the experience of being at a Denny’s at an unusual hour. Because it would reply to people who posted at it, often outside of working hours, it felt less like a brand and more like a human being, which, spoiler alert — it was! Serenity Discko put in exceptional work to be the human behind the brand.

In her session, Lester noted that many young people do not trust banks, institutions, asset managers, or financial advisors. They trust their peers. That’s why Scanlon’s TikToks and short videos have such appeal. She presents herself as she is: a human being trying to figure out the complicated mess that is finance.

Advisors still want to understand the market. They want to know about the opportunities that experts like Rob Arnott see in the market. But, increasingly, they want more than that. Compared to 2024, an additional 10% of attendees at Exchange 2025 indicated they were more interested in networking time, according to a post-event survey. 

Live events offer asset managers a chance to show their humanity

All of this is not to say that asset managers need to find their own version of Denny's Tumblr. But the world is becoming increasingly uncertain for investors. As global power dynamics shift and the world becomes, in many ways, a far scarier place, being human matters more than ever. 

Advisors are starting to understand the need for this shift. They are learning about the value of traditional soft skills. Exchange is curated in partnership with advisors. That’s why so many of the top spots on the agenda were focused on being human. 

Lester’s session urged advisors to understand the thinking and the shame that comes with money for many people. Morgan was doling out practical, concrete steps about how to make an impression on someone and connect. Scanlon was helping advisors see past their generational blinders to connect with tomorrow’s wealth owners. Bage coached participants directly on how to interact. 

Even the activations encouraged human connection. VettaFi leaned into the Vegas theme with a bespoke set of cards, but on each card was a question you could ask someone you just met. The networking cards provided attendees with conversational icebreakers in the form of a game. It’s not a surprise that the most popular booths throughout the conference were Nuveen’s Muni-rita bar and Lazard’s exhibit hall coffee shop. People wanted to enjoy a beverage while networking.

Fix your ability to connect, or stagnate

Behavioral finance is in vogue for a reason: People are seeking ways to connect to and understand each other. As Lester astutely noted in her session, often, when intellectual finance experts talk, people hear Charlie Brown’s teacher. Experts have a tremendous amount of knowledge, but the connection is critical. The smartest, most prescient products will continue to die on the vine if the issuer can’t connect with potential clients.

Conferences like Exchange offer a unique opportunity to get in front of an advisor community as a human being navigating the world. Experiential marketing is an easily overlooked tool in the marketer’s toolkit. Given today’s uncertain climate, it could be more important than ever. If the global economy slows or goes through a period of transition, many firms will be tempted to cut costs and lean on old tactics. The firms that will make it to the other side will be the ones that understand the importance of connecting as humans to other humans. To paraphrase Brylcreem’s legendary jingle, a little dab of face-to-face connecting will do ya.  

Interested in sponsoring a live event? Talk to our experts here.

VettaFi Head of Index Products Brian Coco and Head of Index Strategy Jane Edmondson discussed custom indexing at Exchange. In the session called “How and why asset managers are turning to custom indexing,” Coco and Edmonson explored the latest data and research driving new and innovative approaches to investing. They also covered how index providers can help transform a great idea into a concrete reality.

“There’s been a lot of talk about active ETFs,” Edmondson noted. According to Coco, active managers are frequently using custom indexes. Coco said, “Even though many of them are active, they are still using benchmarks behind the scenes.”

VettaFI’s evolution in indexing

Regarding VettaFi’s evolution, Coco explained, “It’s all premised on one indexing platform and one distribution platform.” VettaFi has acquired eight firms, and Coco shared that beyond bringing those strategies in, it has also benefitted from bringing in the innovators behind them.

Coco also shared his journey in the industry, which started at Credit Suisse. When TMX VettaFi was ready to be in the bond indices business, Coco had the unique opportunity to get his own work back. “It’s really fun to get your baby back,” he quipped.

Fixed Income index possibilities

“This acquisition really gives us the building blocks, which is table stakes if you want to innovate,” Coco offered. “Increasingly, people are looking for specific duration targets. They are looking for indices that are better designed for the ETF wrapper.”

Brian Coco and Jane Edmondson at Exchange 3-23-25

VettaFi Head of Index Products Brian Coco and Head of Index Strategy Jane Edmondson discussing custom indexing.

Being better partners 

Coco said that the ongoing partnership throughout the product lifecycle has made VettaFi’s indexing services stand out. “Our partnership doesn’t end when the index is licensed – that’s when it begins.” Having a marketing arm that helps grow the product has been the differentiator

Coco on theme

Coco also spoke about interesting approaches to broader thematic ideas, sharing one idea that involved looking at the average age of workers in given regions and using that data.“

When I think about the things driving us right now, I think about robotics.” He doesn’t know when C3PO-style robots will be in every house, but it is coming. Edmonson noted that most people already have robot vacuums.

Coco gets direct-to-direct indexing

Direct indexing has been disruptive to the ETF and index industry. “The platforms are really coming into their own partnering with index providers to develop better index solutions.”

VettaFi CMO Jon Fee discussed key trends in distribution to kick off the Industry Conclave at Exchange. Fee led the audience through some icebreakers and then began digging into the disruption driving durable growth.” I fundamentally believe data is greater than opinion,” he said. 

Fee on the cost of success

He shared a sentiment that the cost of entering the ETF market is low but that it is high to succeed. This is due to disruption. “Usually, people don’t like disruption because of its commonality with change.” Distribution has had disruption in multiple vectors, technology has been a big driver. Tech like ChatGPT and artificial intelligence is changing the landscape on various fronts.

How disruption happens

Disruption happens when power is consolidated. Fee noted that Uber broke the taxi and medallion model. Disruption also occurs when an outdated technology is updated. According to Fee, it can also occur when business practices aren’t changing despite negative sentiment. Importantly, it also happens when the data says so. 

“Think about the ETF when it came along. At the end of the day, the ETF is a technology and what did it disrupt?” Fee noted that the mutual fund had consolidated power, was an outdated technology, and the business was ripe for change.

VettaFi CMO Jon Fee on distribution

The “What” and “How” of disruption

Fee believes that distribution has always been about the act of sharing, making for a consistent “what” over time. The “how” is changing, however. Ultimately, much of the disruption has been pointed toward empowering the end investor. “The gap is so wide for financial literacy, but it closes a little bit every year.”

With 4,000+ U.S.-listed ETFs, these funds have created a lot of competition. People are always looking online for any product, including ETFs. This means that issuers and asset managers need to change with the times. Fee said that thinking about people is key. He asserted that issuers could find more success if they hire sellers who think like marketers, hire marketers who sound like sellers, and put AI in their org chart. “You have to start thinking that way.”

Fee on distribution strategy

Looking at how issuers approach distribution, Fee urged them to consider a pivot to client-centric functions. “Put on your values, client-first, whatever it is.” Getting out of asset class structures and leaning on cross-trained people who deploy data-backed tactics. “Those that are winning now, they are allocating to data -backed tactics.” Fee also urged that it is essential to align your business with partners who share success metrics. “Push for outcome-based pricing. [It’s] super common in the tech industry.” Having partners who are invested in your success and who are dedicated to your success can be a difference-maker.

Executing strategically, these days, is very much about service. The speed at which an issuer can bring a product to market and out-service the competition is crucial. “The issuers who are treating speed as IP – they’re winning. They’re also leading from the outside in.”

There have been several recently launched ETF products, seeking to provide investors with private credit exposure in a liquid ETF wrapper. These include new products combining public and private credit instruments that cap illiquid assets at 15%. However, the pricing of the illiquid portion of the portfolio remains a sticking point for regulators. There are also more traditional approaches that provide exposure to liquid private credit instruments such as Collateralized Loan Obligations (CLOs). 

But why are investors clamoring to get private credit exposure in the first place? Private credit offers attractive yields from an alternative asset class that is less correlated with equities and bonds. This diversification benefit can reduce portfolio volatility and improve risk-adjusted results. 

The rise of private credit

It used to be that companies in need of debt financing would go to their community bank and apply for a commercial loan or line of credit. But, that paradigm shifted after the global financial crisis (GFC). Sweeping regulatory reforms applied after the crisis resulted in banks being unable to take on as much balance sheet risk. As a result, private credit solutions outside the traditional banking system emerged to fill this financing gap. Private credit loans can be tailored to meet borrower needs in size, type, and term. Similar to bank loans, most private credit loans are floating-rate debt, moving directionally with interest rates. 

The private credit sector includes four main types of private credit instruments:

  1. Direct lending – Non-bank lenders provide credit to private, non-investment-grade companies as part of the senior debt capital structure.
  2. Mezzanine, second lien debt, and preferred equity - These loans are collectively viewed as “junior debt,” providing borrowers with subordinated debt not secured by assets. It ranks below senior debt and often comes with equity “kickers,” which are additional incentives that can help supplement returns.
  3. Distressed debt - When companies are in financial distress, they work with existing creditors to improve their prospects by implementing operational changes and restructuring their balance sheets. Distressed debt is highly specialized; the abundance of opportunities tends to coincide with periods of economic stress and credit tightness. Lenders are willing to take on higher levels of risk in exchange for the potential for future higher returns.
  4. Special situations - Special situations refer to non-traditional corporate events that require custom and complex lending solutions such as M&A transactions, divestitures or spinoffs, or other situations driving borrowing needs.

VettaFi’s private credit index 

VettaFi’s Private Credit Index (VPCIX) uses publicly-traded, liquid instruments to provide exposure to private credit through Business Development Companies (BDCs) and Closed-End Funds (CEFs) that primarily invest in the private credit sector. Through our composite index of closed-end funds, we identify CEFs and BDCs with significant private loan participation and CLO exposures. Our diversified index approach, consisting of 50-60 holdings, helps mitigate individual credit risk. In addition, the underlying funds are actively managed by some of the best private credit investment firms in the industry such as KKR, Ares Capital, and Blackstone. 

Attractive alternative income opportunity

The VettaFi’s Private Credit Index (VPCIX) construction methodology considers volatility and dividend yield adjusted by float-weighted market capitalization. This index approach overweights funds consistently rewarding investors with high dividend income. The dividend yield of the index is currently over 12%. 

If you would like to learn more about VettaFi’s new VettaFi’s Private Credit Index (VPCIX), please reach out using the form here.

VettaFi CMO Jon Fee recently hosted the webcast, "Turn Data Into Sales: Strategies for Asset Managers." The hour-long presentation featured Microsoft Director Gaby Marano and J.P. Morgan Asset Management, Global Head of Business Intelligence & Analytics, Danius Giedraitis. This event covered a variety of topics centering around how organizations can evolve their data practices. Here are the six key takeaways:

1. Financial services lags behind other industries when it comes to using data

Organizations that take advantage of customer behavioral data outperform their peers by 95% when it comes to sales growth, according to McKinsey & Co. Despite this, many asset managers are underdeveloped in their data capabilities. “There are probably some things that are far along relative to other industries, but there's a lot of opportunity to do things more thoughtfully," noted Giedraitis.

Looking at the consumer side, many companies have extremely sharp data deployment. Food-ordering apps are able to track preferences and send push notifications about deals to their customers, while map apps immediately provide the quickest directions to a destination and account for traffic. 

Financial services, particularly in distribution, have only scratched the surface of customer behavioral data. Investors who are actively researching commodities and alternatives, for example, are more likely to invest in diversifiers than an equity fund. Streamlining this data and providing it to sales gives the team an opportunity to pitch the right product to the right client, much like how Grubhub recognizes a customer's preference for vegetarian takeout and tailors its recommendations accordingly.

2. More data does not always equal better outcomes

One common error organizations might make when beginning to implement new data practices is attempting to sponge up as much data as possible. Data can be a signal, but it can also be noise. When assessing key metrics for distribution performance and growth, the panel recommended focusing on six to eight metrics. Data-driven teams have a playbook on how to react depending on what these metrics do and a deep understanding of how they relate to one another. Once teams start employing more than eight key metrics, the data deluge can be distracting, especially if there's no plan on how to proceed if the numbers fall above or below certain thresholds.

Additionally, organizations that are getting their feet under them when it comes to data lack the capacity to track and interpret a deluge of information. For such organizations, having a data partner is a smart investment that can save bandwidth for sales and marketing teams that might already be spread thin. 

3. Data evolution takes time and organizational buy-in

It is important for an organization to know where it exists on the data maturity curve.

Moving along this curve takes time. Different parts of the company might not be ready to take on new tools, while other parts of the firm may be eager to leap forward. The reality is that good data practices are an organizational relay race in which every department is working in lockstep with every other department. This means transmitting and sharing the right data at the right time. Fee likened it to a “relay race," in which marketing is handing the baton to sales smoothly and keeping up momentum. Getting to this place takes time, effort, and organizational buy-in. It's important to not skip steps and to bring everyone along as a firm moves from underdeveloped status in data use to optimized status.

4. Your "super users" can lead the way

Of course, organizations are composed of people. Different people have different skills, talents, and interests. Some will be “super users" of data. These are people who have an understanding and interest in data, who are eager to experiment with new tools and procedures, even if those tools and procedures aren't fully cooked. 

Super users aren't just early adopters "they're the champions who can drive organizational buy-in for better data practices and tools. They provide critical feedback, help refine processes, and support colleagues who may be less comfortable with change." Since many professionals are too busy to experiment with new workflows, organizations need to present fully codified tools that are ready to implement. Super users play a key role in this by stress-testing solutions, guiding adoption, and ultimately easing the transition to more effective data practices.

5. The AI era is here, but it's early innings

“I think the AI era is here, and it's here to stay," said Marano. Distribution has always been impacted by tools and technology. Everything from phones to social media have changed the way sales and marketing do their work. Artificial intelligence is no different. Having AI that can tackle administrative tasks, take meeting notes, and free up employees to focus on mission-critical work can be a huge boon, but it's important to understand the technology is still in its early days.

In theory, AI will be able to remove the “no joy" parts of work so people can focus on the things that matter most to them. But the technology is still evolving. That said, Giedraitis warned that “every minute you wait is a minute that someone else is moving forward."

Data teams experimenting with AI could be helpful for companies looking to evolve their data practices.

6. There is no silver bullet 

There's no denying well-implemented data practices can transform an organization and help it grow. Proper data usage can increase efficiency and drive substantial AUM growth. But it's important to understand there is no silver bullet to success. There's no one metric or data stream that can instantly solve all of an organization's issues. Data requires multiple touch points, and it needs to be vetted for quality and deployed with thought and care. It's useful to also understand that data goes beyond just numbers. When a sales team has a meeting with someone, there are linguistic data points. Marketers can use behavioral data to look at what people are researching. Data isn't just about numbers going up and down. 

Importantly, you need to read the tea leaves and understand how everything relates to everything else. Clients will engage with products and services in multiple ways. Having a 360-degree view is essential.

Most firms struggle with data and systems integration. The firms that successfully navigate these challenges become industry leaders. In a recent webcast, VettaFi CMO Jon Fee, J.P. Morgan Asset Management’s Danius Giedraitis, and Microsoft’s Gaby Marano discussed how asset managers can turn data into sales.

Jon Fee kicked off the virtual event with brief remarks on the value of data and introduced his co-panelists. Fee said, “Data used wisely can make your organization so much more effective and efficient at the same time.”

Marano and Giedraitis introduced themselves and shared their data “a-ha” moments. “When I first started in the industry, data was a foreign language,” Giedraitis said, sharing how it later became the driving force behind the firm’s distribution strategy.

Gut decisions or decisions based on optics have their place, but Fee noted information stored in someone’s “gut” can’t be shared across a team, whereas data can.

Data maturity in asset management

Financial services lags when it comes to using data to drive distribution and growth. Yet organizations that leverage customer behavioral data outperform peers by 95% in sales growth and more than 25% in gross margin, according to McKinsey & Co.

Giedraitis commented, “There are probably some things that are far along relative to other industries, but there’s a lot of opportunity to do things more thoughtfully.” Though the finance industry has come a long way in regard to data, Giedraitis sees plenty of room for improvement and innovation. 

In contrast, Marano noted GPS apps and even food service apps are quite advanced in their data usage and deployment, saying, “I think that sets the bar really high on the consumer side.” In other words, there are industries that are further along in their data maturity journey, and those industries know when to use data to push their consumers to make a purchase. Uber Eats or Seamless will ping consumers when their usual go to restaurants are having a special deal at a time when the data says the customer could be most eager to purchase, as an example. Looking at finance, she added, “Those using AI are closing 10% more pipeline.” Marano continued, “The numbers are there.”

Common data misconceptions in asset management

Fee offered that there are misconceptions that hijack effective data usage in asset management. The first misconception was “more data equals better outcomes.” Other myths included, “Having data means you are data driven,” and “AI will replace human decision making.”

Speaking to the first myth, Marano agreed. “Getting your data sets to talk to each other is a prerequisite for getting the results you are seeking to drive,” she said. “[If] I had to add one more [myth] I’d say, ‘Data isn’t just numbers, it's text too.’” Language can be data too, and conversations that sales teams have matter.

“Data teams feel like every number, attribute, or field they can report on they should,” Giedraitis said. “With respect to all other metrics, a few metrics matter more.” Finding the metrics that drive the most important signals is critical, and it is easy to get lost in the weeds if you over-engineer. Speaking to AI misconceptions, Giedraitis said “The biggest misconception is people think it will cure all their problems. It won’t.”

Fee shared that the relationship between different pools of data is critical in making informed decisions. “It's never going to be a singular data point, it's going to be multiple data points you are triangulating that give you the trendline that helps you course correct.” When working with clients, he frequently asks what people do when a metric is positive or negative. Many don’t have an answer. “I typically encourage folks to go back and rethink the data that they are pulling.”

The evolution of data deployment

Organizations move through multiple phases in their data deployment evolution. Starting from an underdeveloped place, the initial integration of data can provide information from which they can make ad-hoc reactions. At this stage they have no data-specific roles, but they are beginning to see the value of data. From here, companies evolve into being proactive. Proactive companies start thinking about data quality and metrics, eventually becoming “optimized companies” that have data professionals on staff and implement procedures.

Sharing a graphic about the process of becoming an underdeveloped organization when it comes to data use, Marano said, “The message here is it's a journey, but it requires many foundational pieces to get there.”

Giedraitis added, “You can’t jump from undeveloped to optimized, because that scares people.” It requires a slow articulation toward being optimized. “Crawl before you walk before you run,” he said, sharing the old adage.

“The most important thing is the level of trust in data,” Fee said. When firms, enterprise wide, buy into and trust the data, that leads to success. “There’s a caveat to this — nobody trusts data until they're knowledgeable on what that data means.”

Data personas

Driving impact demands organizations to buy-in. Giedraitis shared, “What works well is finding the power users, the more data-literate individuals across teams.” These individuals can articulate the value of data from within and help build trust. “Doing that from just a small, centralized group is very hard.”

“Innovation is inherently uncomfortable. In disruptive times, trust is more important than ever,” Marano said. Building trust, camaraderie, and joint visions is crucial to getting an organization on board with building data practices.

Within organizations, some people are “super users,” some are “data explorers,” and some are “time-constrained decision makers.” Each will have a different relationship with data. Super users will try new things and be a champion for new technologies and ideas. But some folks are busy. The time-constrained decision maker isn’t interested in experimenting. “Eventually we try to look and empower each of these people differently.”

There are clearly other personas than these, and unpacking where the individuals in a firm are on their own journey and relationship with data can help firms evolve their organizational thinking and data practices.

The 360-degree view

Clients engage in products and services in a variety of ways. “Being able to see someone from all angles is paramount,” Marano said. “AI is only as good as the information it has.” Clients and customers are more than just purchases. What events do they attend? How do they behave digitally? 

“One of the things that’s important to think about,” Giedraitis said, “is to connect the engagement across these often fragmented systems.”

Marano also noted that sometimes organizations try to measure everything and flip what they are prioritizing frequently. Less can be more, and every decision requires time to pan out. Teams need the right data delivered in the right way to truly drive impact. Answering an audience question, the group agreed that six to eight key metrics is a healthy number. More can be too much, while less can limit the full 360 view.

Sales and marketing enablement

Mapping out a work system can be helpful for organizations. Fee compared growth to a baton, noting that teams have to pass opportunities to one another and everyone needs to be prepared to give it their all. Automating these systems and being able to pass data around easily and coherently can be a difference maker for an organization.

Tech and AI

Within the space of distribution, technology is constantly changing the landscape. Phones, social media, and AI are all big things that have changed the way distribution happens. 

Marano said, “I still think we’re in very early innings.” Having machines handle administrative tasks, like taking meeting notes, can help free up time for employees to do what’s most important and interesting about their job. Done well, AI could improve productivity and help manage risk and compliance. 

“Doing more with the same is how we’ve been framing it,” Giedraitis said. Transforming client experience and modernizing market and data platforms are green spaces where the tech can improve, but Giedraitis agreed that taking out the “no joy” parts of work can be hugely beneficial.

“I think the AI era is here, and it's here to stay,” Marano said.

Giedraitis added, “Every minute that you wait is a minute that someone else is moving forward.”

Watch the full webcast here and speak to our data experts.

Evan Harp sat down with VettaFi’s Head of Index Products Brian Coco and Head of Fixed Income Products Samarth Sanghavi to discuss the recent acquisition of Credit Suisse Indices from UBS.

Evan Harp: Can you tell me a little bit about how this acquisition came about and why it is useful for the partners that VettaFi serves?

Brian Coco: To give you a little background, both Samarth and I worked on the team that created these indices at Credit Suisse. I started working on them in 2001 and Samarth joined the team in 2010. So we have a lot of history with these indices.

When the opportunity came about to potentially acquire them, we jumped at it. There are not that many bond index businesses out there. It's a small competitive space dominated by four or five firms. So this was one of the last potential acquisitions available that had history going back 25 years.

Evan Harp: VettaFi’s index team has a reputation for its work in the equity space, can you talk about how this expansion into fixed income will benefit our clients and partners?

Brian Coco: Our clients have been sharing for a while with us that they are looking for a partner on the Fixed Income side that delivers what we aim to do in Equities in terms of product innovation, speed to market, and attention to detail.  They often choose us as a partner not just because of our ability to quickly customize and develop new products for them, but ultimately because of our ability to help educate investors and promote their products. We help explain to their end investors the benefits of using that particular index. 

We knew we could take some of those same concepts and frameworks that we built for equities and roll them out to fixed income. The fixed-income space hasn't seen quite as much innovation as there has been on the equity side. We think we can put a lot of the work we've done on the equity side to good use here.

A long track record

Evan Harp: You mentioned that you have a history with these indices from going all the way back to 2001. Can you talk a little bit more about what your role was back then? Did this opportunity come about because of that history, or is this just a happy coincidence? 

Brian Coco: I was hired onto the team in 2001 as an index research analyst focused on gathering and organizing all the data we would need to build advanced bond analytics.  Big investment banks would build these indices as a soft-dollar service to their trading clients.  It helped them do more advanced portfolio analysis and performance measurement.

Once we made the decision that we wanted to be in the Fixed Income Index business, asking UBS if they would consider selling us the indices was a no-brainer.  I also couldn’t be happier to bring Samarth on board to partner with clients on growing this franchise.

Evan Harp: Samarth, what are you most excited about in regard to this acquisition?

Samarth Sanghavi: I am really excited to be able to work with the products that Brian and I developed many, many moons ago. Frankly, as Brian mentioned, the remit at an investment bank is to develop indices that can help grow our trading volumes.  That often meant that indices were supporting the larger business, as opposed to being the revenue drivers.   For me, it’s exciting to join an organization like VettaFi, where our core focus is serving clients through innovative products and developing a sustainable business powered by our index products.  My goal is for VettaFi to become the premier shop that clients can rely on as a key partner.

The importance of history

Evan Harp: Samarth, you also have a history with these products, can you talk about your career and what led you to become part of VettaFi?

Samarth Sanghavi:  I  started my career at Lehman Brothers as a risk analyst.  A few years into the role, I went back to school to earn my MBA.  After that, I worked as a trader at Bridgewater Associates. Post-Bridgewater, I joined Credit Suisse in the Index Strategies team.  I started out as an Associate on the team, and by the time I left the bank 11 years later, I was running the global Fixed-Income business on behalf of the bank.

Evan Harp: Let’s talk about that 25-year history of these products. Can you speak to what that history means and why it's really interesting and useful?

Brian Coco: Not only do most of the products go back to the late 90s, but most of them were constructed in the early 2000s. They have not just a long history, but a long live track record of being computed and being modeled to represent those individual markets. I think there are only a few other products out there in the space that have that depth of history, especially in High Yield.

What's unique about this particular set is that it's not just the main index levels, but all the deep analysis underneath the covers. You can slice and dice the indices by ratings, sectors, maturity buckets, regions, countries, and other relevant aggregations.

The product line covers government bond indices in over 30 currencies. It covers corporate bond indices in major currencies, including investment grade and high yield within emerging markets - it actually covers credit really well as well. It's quite a broad offering that we're bringing to the table.

Closing thoughts

Evan Harp: In this particular market moment with where the fixed income space is, is there anything else that people should be aware of about these indices?

Samarth Sanghavi: These indices were designed to represent the market. As Brian said, they've been built in a flexible manner so they can be sliced and diced to cater to clients' custom portfolio needs. For those looking for high-quality benchmarks or looking to build bespoke exposures in Fixed Income, VettaFi has the capability to not only create that slice but to create that slice on an index that has a very long live track record so you can benchmark that to your products.

 

Key takeaways

One of the ongoing tailwinds for MLP performance is distribution growth. Distribution trends are very important for MLP investors, who often allocate to the space primarily for its income. Today's note looks at distribution trends for the benchmark Alerian MLP Index (AMZ) and compares year-over-year distribution changes with index performance. Spoiler alert: MLPs tend to perform well when distributions are growing.

Understanding index-level distribution growth and recent trends.

VettaFi publishes a detailed recap of midstream dividends each quarter (stay tuned for the 4Q24 update next week). However, it can be helpful to look at changes in payouts over time at the index level through a simplified chart. AMZ is used here as our broadest MLP benchmark, but keep in mind, the Alerian MLP Infrastructure Index (AMZI) is a subset of AMZ.

To be clear, there can be different ways to calculate index distribution changes. The methodology used in the chart below compares what AMZ constituents are paying out on an annualized basis. It compares annual normalized total distributions with the prior year to calculate a percentage change. (Read more on the methodology here.)

Digging into the chart, distribution growth has clearly been strong in recent years. MLPs have historically focused on distribution growth, but trends have improved since an inflection in free cash flow generation that began in 2020/2021. In some cases, MLPs have been growing payouts after painful cuts made in 2020. Since July 2021, there has only been one distribution cut for an AMZ constituent. (USD Partners, which had a very small weight in AMZ at the time, suspended its payout in 1H23.)

AMZ: Y/Y change in normalized total distribution paid

While the data points from 2015 to 2020 are bleak (explained more below), it is important to note that MLPs have improved drastically over the last decade. Highlights include lower leverage and stronger balance sheets, a shift to self-funding equity capital, free cash flow generation, and widespread buyback authorizations instead of equity issuances (read more). Burdensome incentive distribution rights have been largely eliminated. MLPs are much better positioned today than they were during the oil downturn of 2014-16 or during the growth capital spending frenzy of 2018-19.

Why was 2015 to 2020 so bad?

Distribution trends were clearly lackluster from 2015 through the pandemic. Recall, energy was broadly under pressure from 2H14 until oil prices bottomed in February 2016 at $26 per barrel as OPEC fought U.S. shale for market share. While oil and gas producer MLPs are not currently eligible for AMZ, there were seven producer MLPs in AMZ at the end of 2014. Those names were quick to cut their payouts when oil prices fell. As their equities plummeted, they became ineligible for the index. There were no upstream MLPs in AMZ by late 2017.

Even in 2015, the vast majority of AMZ constituents were increasing or maintaining their payouts. For AMZ, cuts had an outsized impact as high-yielding producer MLPs were replaced by MLPs with lower yields. For context, normalized distributions for AMZI, which has never included producer MLPs, were only down 5.9% in 2015. Some larger MLPs cut their payouts in 2016 and 2017, but the impact on distributions was less pronounced because they were not replaced with lower-yielding names. Importantly, Enterprise Products Partners (EPD) and MPLX (MPLX) are examples of MLPs that have never cut their distributions.

Fast-forwarding to the pandemic, 16 AMZ constituents cut their payouts for the first quarter of 2020 (read more). Prior to this, the largest number of distribution cuts in a single quarter had been five. This helps explain the drastic drop in normalized total distributions shown above. In 2020, cuts generally came from names focused on gathering and processing or petroleum transportation with elevated leverage and below-average distribution coverage. These were largely small-cap names that were trying to shore up their balance sheets in an unprecedented energy macro backdrop.

Performance has been strongly tied to distribution trends.

Generally, MLPs tend to perform well when distributions are growing, but distribution cuts weigh on performance. The chart below plots year-over-year distribution changes since 2007 from the bar chart above with the annual price return of AMZ. When distributions are growing, price returns tend to be positive or nearly flat as highlighted in the top right quadrant. The Global Financial Crisis in 2008 marks the only exception (i.e., significant distribution growth with very weak performance), as shown in the lower right quadrant.

AMZ price return (Y-axis) vs. Change in normalized distribution (X-axis)

Typically, negative price performance coincided with lower distributions as cuts weighed on equity prices. This is particularly exemplified by 2015 and 2020, when the impact of distribution cuts was most pronounced, and AMZ performance was particularly weak. These examples are shown in the lower left quadrant.

There have been a few occasions since 2007 when AMZ saw positive price returns amid declining distributions. This was the case in 2009, 2016, and 2021, as shown in the upper left quadrant. In short, the index was rebounding after painful 35%+ price declines seen in 2008, 2015, and 2020.

Related: Why most MLP ETFs own less than 25% MLP

So what?

Investors often ask if the positive momentum in the MLP space can continue. Arguably, investors can likely feel good about future MLP performance if they expect distributions to continue growing. We believe the outlook for MLP distribution growth remains positive, as companies largely generate free cash flow and prioritize distribution growth. Additionally, companies are in a stronger financial position today given lower leverage, better balance sheets, and greater financial flexibility.

Of course, past performance does not guarantee future results. Looking at distribution trends alone as an indicator of MLP performance is admittedly oversimplifying. However, in the absence of a crystal ball, the outlook for distributions can provide helpful context for expected MLP performance.

AMZ is the underlying index for the JPMCFC Alerian MLP Index ETN (AMJB), the ETRACS Alerian MLP Index ETN Series B (AMUB), and the ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN (MLPR). AMZI is the underlying index for the Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB).

This article was originally published February 25, 2025 on ETF Trends.

Recently, VettaFi CMO Jon Fee was interviewed by the CMO Network’s Jay Sen. The interview is available on the Content Marketing Virtual Summit Podcast.

“What got me into marketing was one part curiosity, and one part just pure luck,” Fee said at the top of the interview. Coming into marketing from more front of office roles, such as distribution, Fee was asked to take on additional marketing responsibilities. “The curious part of me loved the unknown of trying something new, but then also how much technology was being used back then even as it just relates to the birth and rapid expansion of the internet.”

How VettaFi leverages data to help issuers

Fee sees VettaFi as working primarily with issuers and asset managers. After explaining VettaFi’s role as an index provider is to help issuers develop products, primarily ETFs, Fee said, “the second thing we like to do is help those companies better understand who to bring those products to market to, who to target. And that’s where our data & analytics gets involved.” VettaFi has data & analytics products that can help issuers find quality leads, shorten sales cycles, and optimize their marketing efforts to reach the prospects most likely to convert.

“Common challenges that clients are trying to overcome include how to optimize their digital marketing online, using more data and analytics,” Fee said. “It's not uncommon for a lot of our clients to be operating with a mix of different marketing tactics, but not sure which ones to weight, one over the other.” He noted that data and analytics are particularly useful for unpacking which audiences are connecting with a product and which audiences need bolstering. Perhaps RIAs aren’t connecting. In such an instance, VettaFi’s data and analytics tools can help chart what marketing collateral is working well for those audiences and help issuers strategize their outreach efforts from there. 

If a given issuer wants to innovate a new product, VettaFi’s indexing capabilities come into play. “We’re constantly helping clients of all size,” Fee shared. “Through data, we help make healthier connections throughout the marketplace.”

Going on about go-to-market

Asked about his go-to-market strategy, Fee said, “core to any strategy within marketing or distribution has to be your go-to-market.” He offered three things to look at.

Are we achieving product market fit? If the product is new, it’s worth reflecting on whether or not you’ve cracked the code for untapped demand in the marketplace. Are the functions right? Is the product ready?

What are clients’ outlook? Buying journey is one thing, but understanding how clients feeel about the current market environment and changing regulations is essential. Understanding headwinds can help you understand what budgets might look like for potential clients. A lot of headwinds  can create challenges in generating new business.

What’s everyone else doing? Fee stated the importance of understanding what the competition is doing. “Are they innovating faster than you? Are they setting prices lower than you? Are they placing prices lower but actually giving up a lot of quality and value add that a client actually needs?”

Generating leads and building demand

When asked about his preferred channel for generating leads, Fee said, “everyone is looking for a silver bullet. But, spoiler alert, there isn’t really a silver bullet.” He shared that he likes thinking about his relationships with clients and prospects through the lens of friendship. Authenticity, dependability, and trust are all critical traits in a friendship. “You start to think more and more about how do you achieve that in a friendship, and you realize its not through a single touch.”

One phone call, email, or dinner does not deepenreal connections. Rather, a mix of those things over time does. Similarly, there is no one channel that will forge a true business partnership, but rather, the right mix of channels.

Content and distribution

The idea that “content is king” is something of a cliche in marketing, but Fee believes it to be true. “I believe it to be as true today as it was a decade or even two decades ago,” he said. The “how” has evolved and changed over the years. Ten years ago you might not be using social media, and twenty years ago you might not be using email as much. But the “what” goes back to the content.

“We’ve said historically that content is king in marketing. I think content is king in distribution.” Sales teams require sales enablement and a good talk track. That’s content, according to Fee. “Whether you are dripping it out through [email] nurture journeysl or making it snackable on social, content is still king because that is what you are putting in front of your clients.”

Fee sees the limitations of generative AI 

AI has been a buzz word throughout 2024. The technology has its champions and its skeptics. There’s no denying that it has invited curiosity and interest among many. “I play with AI almost every day as part of my daily routines of putting pen to paper and pushing myself to be a better communicator,” Fee shared. “What I’ve learned in using AI quite a bit this year is you can’t spell ‘plagiarism’ without ‘AI.’”

If content truly is king, Fee sees some issues with creating content using ChatGPT. Because generative AI relies on a pre-existing set of content, the content that it creates is neither genuine nor authentic.”You could be doing a disservice to your brand.” Fee noted that though you can get a short term win by creating content in seconds that might have taken longer, there is risk of long term damage, as the content will not be original.

Metrics: Finding the right Indicators of success, now or never

According to Fee, “You never really know the value of a creative campaign until it is in market.” Something could seem to have a lot going for it, but until it is in the market place you can’t really know whether it works. Fee noted that there are many metrics that can tell you a given piece of creative’s effect once it is in market. Did it get clicks? Did people stay on the page and see it through to the very end? “I think those metrics are fantastic and it’s taken a lot of the subjectivity out of whether or not the marketing is good, or at least it’s created a grounding.”

Fee took care to express that there is innate value in doing something creatively and artistically sound, but at the end of the day you need to drive growth, and these metrics help show that. “If you can’t measure it, you can’t manage it.”

Fee urges marketers to rally around two kinds of measurements: quality and quantity. “If you are only measuring the success of your website by the number of people who visit it, you’re only looking at quantity.” Getting people to show up is a success, but you need to think about the experience of being on that website. Are people immediately turned off and leaving, or do they want to stay and look at other things? “Time on site is fairly easy to measure.”

Branding challenges

Marketers face lots of challenges. According to Fee, one of the biggest challenges is just a lack of understanding of what marketing is and the value of marketing. “A lot of that lack of understanding of marketing or frankly of brand typically surfaces between functions in an organization.” Financial organizations might not understand why they need to spend on marketing, while sellers might not understand why things can’t happen on a certain timeline. Much of the friction within organizations around marketing is ultimately rooted in a lack of understanding. Fee advises that marketers should approach their colleagues in a similar fashion to how they approach a prospect. “You can not assume that people get how it all works together from a marketing perspective, so you have to take the time to educate folks on it.” A common lexicon is vital, and it takes time for people to understand why there is more to a brand than a logo. 

“I’ve heard this before, folks used to say ‘marketing is colors and fonts.’ That’s like saying selling is just cocktails and dinner!” Fee said. Creating a common lexicon can help create cross-functional opportunities and break through the friction.

Building a top-tier marketing team

Fee shared his belief that the most important decision any leader can make is who they hire and what they acquire. Acquiring anything, from another company to a new technology or service, can change the way that your team works. Fee says that people come first, though. “There’s an ongoing war for talent that I don’t see changing anytime soon.” Brands that hire the best people and get them working together will better set themselves up for success. “The [teams] that can align to common success metrics, align to how to work together in a work system, the teams that can be the most transparent and accountable to each other are the teams that are winning and will continue to win.”

Giving advice to new up and coming marketers, Fee underscored the importance of building a network from moment one of your career. Everyone you work with is in your network. “I can’t urge you enough to keep that network healthy and connected.” 

His final piece of advice is for marketers to “stay forever curious.” There will always be a way to do things better, and you need to be curious to be open to it.

Learn more strategies to sell your funds effectively by joining this upcoming free webcast.

Professional conferences present asset managers a host of opportunities. They are useful vehicles for connecting with financial advisors, showcasing thought leadership, and raising brand awareness. But every firm comes into a conference with a different set of opportunities.

Small and medium-sized firms share the conference floor with some of the largest industry leaders, creating enormous potential to codify your brand’s strength. Being present at the event, the brand status of a smaller firm gets a boost. But there are also unique challenges. Smaller firms come to conferences with less boots-on-the-ground than larger firms, and typically sponsor at lower tiers. With tighter budgets and less on-the-ground resources, smaller firms need to exercise their creativity and innovation to create memorable experiences for attendees.

Smart event activations create the potential for small firms to stand out amid big names. Understanding how to create and deploy a smart activation strategy can make a huge difference for these firms, as they look to spark growth.

Here are six tips for creating activation experiences that can further boost your brand and promote growth.

Align your activation with what your brand does and your brand identity

An event activation is an opportunity to express your brand’s values and personality. It can also express the purpose of your product. Deutsche Bank’s plain vanilla ice cream activation is a great example of how a brand used what the industry was calling “plain vanilla beta,” and created a fun idea that resonated among attendees. Vanilla might be a synonym for boring, but vanilla ice cream on a hot conference day is extremely welcome for many.

Larger brands need to cast a wide net. They typically have bigger budgets, but not necessarily the same wiggle room a small or medium-sized firm has. This limits some of their messaging potential, as they need to try and be all things to all customers. Smaller brands don’t have this obstacle, and they can find enormous success simply by expressing who they are and what they value in a meaningful and striking way. In other words, smaller brands have some permission to disrupt expectations and cater to niche markets with more direct messaging.

Brainstorming a smart activation means understanding your brand identity. What is your brand? How do advisors think about your brand, and is there a delta? If there is, how could you position yourself as the brand you want to be in your activation?

Be the talk of the conference by using new technologies

At Exchange 2024, Grayscale put on a laser drone show for attendees. This splashy activation leveraged drone technology to create an unforgettable spectacle for everyone present. As a cryptocurrency-focused asset manager, Grayscale didn’t just stick to the usual conference giveaways. Instead of sunglasses and water bottles, they delivered a full-scale laser show—using drones, lasers, and cutting-edge tech to create a brand experience that truly stood out, and aligned to their brand identity.

New technology can push budgets for smaller firms, but it's an investment that could pay dividends. Professional conferences are where your potential clients are gathering. Spending a little extra resources to create a memorable experience can be a vital component of how you transform your small firm into a medium-sized firm, or your medium-sized firm into an industry leader. Beyond driving content creation and brand awareness, cutting-edge tech activations hold real value in making your brand the highlight of the conference. New tech is always fascinating to people. Most people haven’t yet donned a VR headset. They don’t have a “moving headshot” and they probably rarely see drone laser shows. Look for interesting technology and a way to deploy it to create memorable experiences.

Build anticipation outside the event

Anticipation is a critical tool that storytellers, creatives, and marketers have leveraged throughout human history. Your favorite television series will frequently tease future events to build audience buy in. Foreshadowing is often employed in literature. Whether it is Shakespeare’s Macbeth, which features witches talking about Macbeth’s rise to power near the start of the play or Luke Skywalker having a vision in Empire Strikes Back that teases at the reveal of Darth Vader’s true identity in Return of the Jedi, anticipation can capture imaginations and draw in audiences.

Marketers use anticipation to build up hype. There are a number of hooks that can be deployed to create anticipation. Building anticipation in advance of an event is a powerful tool that small and medium-sized companies can deploy ahead of a conference to start building buzz. Something as simple as a countdown clock with no further explanation can have audiences immediately asking questions. What is this clock counting down toward? What will happen on the target date? The desire to understand draws audiences in. Many people find pleasure in cracking the clues before the main event.

Your firm may not be as widely known as other sponsors, but if you can get people curious about your upcoming presence as a conference, you’ll have helped make your impact greater before even setting foot in the space. This means announcing your presence as a sponsor early and then doling out tiny teases of what your activation might be to build excitement and anticipation.

Consider gamification

Gamification is an easy way to drive interest. Human brains are hardwired to seek rewards, even if those rewards are purely symbolic. There are apps that give points for completing daily chores, and they are enormously successful because they work. Doing the dishes is a dull activity, normally. Award points for doing dishes, and suddenly people are motivated.

When you look at activations, gamification can generate buzz and promote discourse. If you have an ongoing trivia game (or something where you can display a leaderboard) as your activation, people will be interested. Their competitive nature will kick in, and they’ll want to “win” which only increases engagement in your activation. 

Put the audience first

It can be easy to get into your own head as you plan out your event activation. Something both small and large firms need to keep in mind, is that an activation is ultimately about the audience. You need to think through the experience of the activation from the attendees’ perspective. 

Imagine not knowing anything about your brand and activation. What would it be like to experience it? Is it engaging, informative, and interesting, or is it distracting and confusing? If it is the latter, how do you make it more engaging?

At the end of the day, an event activation needs to be in service of the attendees. Yes, you are communicating something about your brand, but to make the activation truly special it has to surprise, delight, and uplift everyone involved. Especially as a smaller firm, you want people to walk away from the experience having unambiguously had a great time.

Use the activation to capture interest

Activations have a ton of value from a branding perspective, but they can also be crafted to capture interest and identify leads for future nurture opportunities. 

One way to capture interest is by asking for information in exchange for a reward. This can be done ahead of the conference, to build hype and booth traffic, as well as during the conference at your activation. J.P. Morgan Asset Management did both. Its “Built to Last” activation asked financial advisors to upload a portfolio “built to last” into JPMAM’s digital portfolio analysis tool. The insights team analyzed it against key risk measures with the winning portfolio getting a complimentary interview with a media partner. 

This was also supported by using a steel booth (because steel is built to last) and pivoting away from low cost junk tchotchkes to things that are more robust or have more utility (phone chargers, metal water bottles, etc.) There was an engraving station at the booth which engraved these higher value giveaways live. This was used to capture advisor information, as they needed to submit details to get the live engraving. 

This activation followed every step in this tip sheet: it aligned with brand identity, it leveraged modern technology in the risk assessment tool, it built anticipation in advance, it gamified the event, and it created a fun experience for all participants. But the real clutch move was it captured concrete information and generated leads.

Final thoughts

Simply attending a conference has innate value. Firms that show up to a big industry event can set up business and get things done. But once you commit to attending, there’s no reason not to put in the extra effort and try to create a memorable experience aligned to your marketing goals. 

Taking a chance on a clever activation and thoughtfully executing it can attract attention, make your brand stand out, and capture concrete leads. The buzz also gives you social media fodder and something to write about in blogs and articles long after the event itself.

With the Exchange conference coming in March, you still have time to create a memorable activation that can put your brand in front of advisors. Looking to start bringing your event activation strategies to life? Our team can help you brainstorm and execute an activation strategy at Exchange.

In this month’s CMO Views, I connect with Karrie Van Belle, Chief Marketing and Innovation Officer at AGF Investments Inc. in Toronto, Canada. 

I’ve learned more talking to leaders one-on-one than I have reading books or staring at dashboards — and that alone says a lot because I love to read and I really love dashboards. I am a data guy, but as I continue to digitally transform professionally and personally, I find human connection more important than ever. We can learn so much from each other, and that’s why I’m excited to launch VettaFi’s CMO Views — built by marketers, for marketers. This look into some of the most brilliant minds in marketing will (hopefully) keep you entertained, inspire you, and teach you something you did not know. 

Karrie is a strategic driver of AGF’s digital transformation agenda, focused on driving efficiencies and enhanced client experiences for the firm, in addition to overall responsibility in leading the firm’s marketing and communications strategy across its diverse range of investment management platforms, and leadership of the firm’s product initiatives globally. Karrie has more than 20 years of marketing and communications experience rooted in the Canadian asset management industry. 

Jobs and careers — From first job to dream job 

Jon Fee: I think a lot about the difference between a job and a career. We all spend a huge slice of our lives working, and that time can drive satisfaction and growth, or it can leave us feeling disconnected and unhappy. What do you think is the difference between a job and a career?  

Karrie Van Belle: A job is something you go to from 9:00 to 5:00 for the paycheck, while a career is something that you are passionate about. A career is gratifying and something longer-term and evolutionary. A career should always provide you with opportunities for growth.   

Jon Fee: I completely concur. Tell us a little about your first job.  

Karrie Van Belle: I started working as a teenager and gained experience with typical jobs in fast food and retail. I even spent some time working on a tobacco farm. These first jobs taught me work ethic, responsibility, and independence.  

I was also a bank teller at Canada Trust. In many ways, I consider this to be my first real job. Looking back, the lessons I learned at this job have stayed with me throughout my career. My experiences taught me about the importance of engaging with clients, being transparent in my communications, and showing empathy. On any given day you did not know who was going to enter your branch, what their day had been like, and what their money situation was, and being able to deliver the client experience and service was critical despite how they may have been feeling when they came in that day. 

Jon Fee: What about your dream job? If you could pivot to a passion project as a dream job, what would it be?  

Karrie Van Belle: Anyone who knows me knows that I am passionate about sports and marketing. My dream job would be to combine these two passions. Advertising, as an interest and passion, for me, started at a very young age — I will always remember my grade six speech which focused on the role and impact of ads where I sang the Mr. Potato Head jingle at the front of my class. If you know me, you’re likely surprised to hear that I even had the nerve to sing in front of 30+ of my classroom peers. I am not a singer and I am introverted and quiet by nature, but this topic brought out my passion.  

Jon Fee: Oh my gosh — I would love to hear you sing the Mr. Potato Head jingle! What was your first job in marketing?  

Karrie Van Belle: My first job in marketing was with Edward Jones in Canada. It was a role that gave me experience as both a graphic designer and a writer. From there I continued to extend my learnings into new areas of marketing and communications including brand, advertising, market research, as well as digital and data strategy.  

Jon Fee: Marketing is constantly changing and evolving. Tell me about how marketing was defined when you first entered the field vs. how you, as a CMO, define it today.   

Karrie Van Belle: Previously, marketing was about making something look pretty or sound right. I think marketing has become more science than art these days. While not to diminish the creative aspect of our industry, I think marketers, now more than ever, are required to understand the data that is driving their end creative output. The CMO role itself continues to be elevated within firms, recognizing the role it serves in accelerating and understanding business strategy. We are seeing the evolution from a creative production house to a strategic partner.   

Pets and pet peeves  

Jon Fee: Probably the most important question I will ask you: Do you have pets?

Karrie Van Belle: For me, a home is not a home without a four-legged fur monster to come home to. My pets of choice are dogs, which I have had all my life. Growing up, I had beagles around the home, and since my first home with my husband, we have been proud lab owners. We first welcomed home a loyal and loving chocolate lab named Wendel, who gave us 14 perfect years. More recently, our home is filled by a soon-to-be three-year-old fox-red lab named Bowie, equally loving and loyal, able to play ball for hours on end, and notoriously believes he is starving in true lab fashion.   

Jon Fee: Bowie is stunning! To flip this “pets” section on its head a bit and tie it back to work, what about pet peeves? What annoys you the most in the workplace?   

Karrie Van Belle: My biggest pet peeve is when people don’t take the opportunity to learn from their mistakes.   

I encourage people to take risks. But if the risk doesn’t pay off, they need to be willing to learn, grow, and not repeat the same mistake. My other pet peeves include people talking over each other, not being transparent, having to repeat myself (which might be because I speak so quietly), and a messy desktop.  

Lessons in leadership

Jon Fee: Let’s talk about leadership. What daily habits or weekly routines do you have that keep you sharp as a leader and evolving as a marketer?  

Karrie Van Belle: As a leader, I always ask a lot of questions. I never think I’m the smartest person in the room, and frankly never am, and that allows me to ask questions.   

I believe in always being curious. I’m willing to question the status quo, which is something you need to do to grow and learn.   

Of course, it’s also important to challenge yourself to do better. You can never be complacent if you want to evolve as a leader.   

Jon Fee: That’s so true. The moment you think you have everything figured out is the moment you start making mistakes. Is there something you can point to (a book, an experience, a person) that has helped keep you moving and evolving, and had a big role in shaping your leadership style?  

Karrie Van Belle: I feel fortunate that throughout my career I have had exposure to great leaders, mentors, and training programs.   

It has been a gift for me to be around leaders that challenge me and make me think differently. At the same time, the training programs I participated in gave me permission to invest in myself and use the resources to develop as a leader.   

I have also worked with some great agencies, and looking back, those relationships really taught me the ropes — especially when it came to learning the advertising side of the business. These relationships still exist today, and I have a network of people I can call to bounce ideas off of or to get advice.   

Throughout my career, I have worked with a lot of smart people. They have challenged me and really given me the opportunity to learn and grow as a marketer. As a result, I am committed to giving my team members the same experiences including the opportunities to develop and evolve.   

Digital transformation 

Jon Fee: That’s an incredible answer, thank you! For the next section, I want to talk about digital transformation. This is a challenge I love to ask of marketers: Describe digital transformation without using the words digital transformation.   

Karrie Van Belle: It is about using emerging data in different ways to accelerate change. It’s about using data and insights to drive efficiencies and improve the client experience.   

Jon Fee: Good answer. What is something in this space that nobody is thinking about?   

Karrie Van Belle: I think something that everyone needs to think about or be aware of is that when it comes to digital transformation, you will always be playing catch up.   

By the time you’ve thought of something, it’s already old. And the reality is that you need to be okay with this. Digital transformation is about evolving, and you need to move forward even when it feels like you’re playing catch up.  

Giving back  

Jon Fee: We’re big on community in VettaFi, and personally, I always find one of the best expressions of community to be volunteerism. Tell me about your volunteerism and giving back to make a greater impact.   

Karrie Van Belle: Giving back is very important to me, especially when it comes to supporting initiatives related to financial literacy and education.   

When I was a teenager, I had a family friend go above and beyond to help me save money. Her gesture set me up for success as I was preparing for university. I will never forget what she did for me or the lessons I learned.   

As a result, I am passionate about supporting organizations that help set students up for success at an early age.   

I have recently been involved in Junior Achievement and the Merit Award Bursary.   

Junior Achievement is the world’s largest not-for-profit organization dedicated to educating young people about business. Their programs are focused on financial literacy and emphasize the advantages of staying in school and how this choice can positively impact future dreams and career choices.  

Similarly, the Merit Bursary Award works to inspire high school students to continue their education while recognizing the contributions they’ve made to their communities.  

Jon Fee: I know we saw each other down at the Exchange conference. I’m over the moon to share that Exchange attendees volunteered 130+ hours and we contributed over $50,000 to the Susan G. Komen Foundation, The Surfrider Foundation, and JA Worldwide (Junior Achievement). 

Crystal ball - What's next for marketers

Jon Fee: I love that you can recognize how people have lifted you and are endeavoring to do the same for others. We’re coming into the home stretch here, and I’d love to cast our gaze on the future. Thinking one to five years out, tell me about your predictions for marketing and marketers. What’s coming next? How do we prepare?

Karrie Van Belle: If only I had a crystal ball. While I don’t have a prediction, I would say to all marketers to strap in as it is going to be a fun, fast, and bumpy ride. I don’t think anyone can know what is coming next, so you just have to remember to be nimble, agile, and open to the unknown.  

A parting gift from Belle

Jon Fee: Karrie, it has been amazing talking with you. As we reach the end of this CMO View though, I’d love for you to leave a parting gift for our readers. Can you share with us an album, book, movie, TV series, or other creative work that brings you joy right now? Also, tell us what is it about this creative work that fires you up. 

Karrie Van Belle: When it comes to a TV series, I highly recommend “Ted Lasso.” As you probably know, it is a show about an American football coach who is hired to manage a British soccer team. I was a fan from the very first episode and couldn’t wait to keep watching.   

My family enjoys anything sports-related, but I was also drawn to the show because of Ted Lasso’s positive attitude. There isn’t another character like him on TV, and he’s being recognized for his leadership style. In fact, there are articles about how the character is reinventing leadership and proving that nice leaders can finish first. It’s all very refreshing and reminds me of the lessons I learned about engaging with others, being transparent in my communications, and showing empathy in my first job as a bank teller.   

And when it comes to books, I’ve always been a fan of Douglas Coupland. While Ted Lasso is redefining leadership, Douglas Coupland literally defined a generation with his book “Generation X.”

He is a Canadian short story writer, essayist, and visual artist, but it’s his books that have really left an impression on me. Some of my favorites include “Shampoo Planet,” “Microserfs,” and “Girlfriend in a Coma.”

Through his work, he has been recognized as one of the most original commentators on mass culture of the late 20th and 21st centuries.   

Follow Karrie Van Belle on LinkedIn.

This article was originally published on March 14th, 2023 on ETF Trends.

 

A new era for defense

Global defense spending reached an all-time high of $2.4 trillion in 2024, rising 6.8%, which represents the steepest increase since 2019. Beyond the heightened demand being created by prolonged conflicts in Ukraine and the Middle East, is the need for equipment modernization and increased spending after many years of underinvestment.  

Global Military Expenditures 2013 - 2023

The “Peace Dividend” era when countries could focus on domestic programs instead of military defense spending is over. Among NATO member countries, the 2% of GDP spending target has been another driver behind increased spending. With 23 of NATO’s now 30 member countries (Finland and Sweden joined since Russia’s invasion of Ukraine) meeting the 2% of GDP target, higher targets are being proposed. The European Union has proposed an increase to 3% of GDP, while the Trump Administration is demanding an increase to 5% of GDP. Regardless of the end spending target percentage, the trend for spending on defense is moving higher to the benefit of defense stocks. 

Modern defense story

In addition to more spending, the kind of spending is also changing in favor of modern approaches that leverage technological solutions over more boots on the ground.  Cyberspace has become a new military domain in addition to land, air, and sea. This translates into more spending in areas such as artificial intelligence, robotics, unmanned vehicles, drones, cyber defense, and other modern defense solutions. 

VettaFi’s Global Defense Leaders Index

VettaFi’s Global Defense Leaders Index (VGDEF) tracks the market performance of companies listed globally in select exchange countries that provide exposure to the national defense industries of NATO and major non-NATO ally countries. Global military spending among NATO members and its allies has accelerated in response to rising global aggression around the world and the rising need for modernized defense solutions. NATO members currently comprise 55% of the world’s military expenditure.

Companies in the index are exposed to global defense spending such as military aircraft, defense equipment, and future of defense technologies stand to benefit from increased spending levels and the need for modern defense solutions like autonomous vehicles, counter drone systems, and artificial intelligence.  

The largest holding in the index is AI big data analytics firm Palantir Technologies which was the top-performing stock last year in the S&P 500, up 340%. Rising military spend and increased order backlogs are driving outsized returns among defense and defense technology companies.  

Changing story requires change in exposure

Our Index construction methodology provides exposure to the changing realities of modern defense, holding both traditional defense players and companies on the bleeding edge of modern defense technological innovation. While past performance is not indicative of the future, our index approach has delivered strong returns relative to traditional defense indexes and those focusing on technology alone. 

If you would like to learn more about VettaFi’s new Global Defense Leaders Index (VGDEF), please reach out using the form here.

Setting the right tone for a new year is critical to any brand seeking sustainable growth. Here are four things you can do to boost the effectiveness of your marketing campaigns and position your brand for long-term success.

1. Commit to the full-funnel campaign

After launching a new campaign, a common mistake brands make is pivoting before the campaign can truly begin to pay dividends. Flows may seem static for weeks or sometimes months after launching a campaign. But this is normal as it takes effort and time to drive conversions at scale. All prospects are different and so are their digital journeys. They may need to see your brand logo, hear about the product multiple times, and perhaps see the ticker referenced in media before they even research and consider your product.

Building brand awareness is a marathon, not a sprint. It requires multiple touchpoints and continuous effort over an extended period. At the same time, full-funnel marketing means giving every part of the funnel attention to set yourself up for ongoing success. It's common to want to concentrate resources on lower funnel tactics as they can more easily tie to revenue. In the short term, this can help with boosting a few key metrics, but it comes at the cost of ignoring the rest of the funnel and harms your long-term success.

Time-tested awareness tactics, like display ads, have a place. Your campaigns should be built with all stages of the funnel in mind with tactics deployed in each stage - awareness, interest, consideration, and intent. Focusing on a well-rounded campaign will help generate long-term success and build consistent lower-funnel opportunities.

2. Complement digital campaigns with in-person event sponsorships

The world might be increasingly digital, but that has only increased the value of live events. Connecting with clients and prospects in person can be the differentiator in moving a prospect through your funnel and building brand loyalty. 

An event that happens early in the year, like the Exchange Conference, gives you a chance to showcase your thought leaders and make real connections with advisors - both clients and prospects. Event sponsorships can fuel content for future marketing efforts. Aside from the live connections, they can also be leveraged to generate additional digital content. Write-ups, recaps, and deep dives about topics brought up at the event can provide quality content opportunities.

Studies also indicate that combining in-person events and digital efforts is more effective than digital marketing alone. Event activations can help reinforce your digital campaign messaging, bolstering brand awareness and consistency across mediums and platforms. 

3. Improve your data game to sharpen prospecting efforts

Once prospects are ready to convert, they've likely conducted their own research. With the right approach to data, including a good blend of first- and third-party data, you can get a picture of which prospects are ready to purchase, and which ones aren't as progressed in their journey through the marketing funnel.

Optimizing the efforts of your sales team relies on quality data. For example, a prospect could be interacting with content, clicking through emails, and even doing research for similar products. If your sales team has the ability to see this information, then they can strike at an opportune time to make the conversion. But if this data is obscured from sales, they might not know how to best prioritize their reach out. Putting time and energy into leads that are actively on the cusp of making purchasing decisions instead of on cold calls can boost sales efficiency. The key is leveraging the right advisor data, prioritizing actions, and delivering the information directly to sales.

4. Develop products that resonate with investors, with the right partners

Some issuers are concerned about product saturation, fearing they should be conservative with new products. The ETF marketplace is indeed more crowded than ever. However, fear-mongering about the oversaturation of the ETF market has been a constant refrain. It happened when there were only 100 ETFs and when there were 1000. New products to solve investor problems will always have a place in the market. You shouldn't pump the brakes on product development, you should be looking for the right partners to help create useful products that solve client problems.

The right partner is responsive and provides cost-effective services and solutions to your indexing needs. Your index should accurately capture the part of the market you are seeing opportunity. Additionally, your index partner should be able to rapidly backtest and come up with smart solutions and ideas. The right partner will not only help your design and build your product but also assist you through launch and as you scale.

Learn more: 7 ETF marketing tactics to attract investors

Let us help you get ahead

Planning ahead is always useful, and there's still time to set yourself up for success in 2025. VettaFi can help issuers on several fronts. The Exchange Conference is one of the most valuable financial advisor-centric events of the year and happens in March. VettaFi's index factory can help you create new products or benchmark existing funds more efficiently. With a variety of digital marketing and data services, VettaFi can be a go-to, one-stop shop for issuers.

Learn more here.

It's hard to believe it, but I've been going to industry conferences for about a decade. 

Prior to my role at VettaFi, I worked for a major asset manager running their U.S. ETF marketing efforts. Sponsoring and attending in-person events was a key component of our distribution strategy. Initially, this meant attending multiple smaller industry events as we tried to gain initial traction. Eventually the focus narrowed to a few larger key events, such as Exchange, and showing up in bigger ways as our ETF suite picked up momentum, ultimately growing to over $20 billion in AUM at the time of my departure.  

Now, in my current role, I'm part of an organization that produces a large financial services conference. In its fourth year, Exchange is an annual event that brings over 1,900 members of the financial services community together - and a large part of being able to make an event on this scale is through our sponsors.

As such, I’ve been on both sides of the sponsorship equation. I have been both a sponsor of a big event as well as the host of a conference. I've seen my fair share of event activations spanning various sizes - small, medium, and large. Here are three of my favorites. 

P.S. This is a personal opinion and not a representation of the firm’s view. All of our sponsors and partners are highly valued. I just want to share what spoke to me specifically.

Deutsche Bank’s plain vanilla activation 

This was several years ago - but here's what I remember: It was at an industry conference; every inch of the hotel was sold for branding. The big issuers with the big bucks had secured the big branding opportunities, and it was hard to break through the noise and stand out.

It was also a time when all the buzz was about “smart beta.” What is it, will it last, is it just a fad? Passive beta was old news.

Deutsche Bank faced this challenge head on by using their 10x10 booth in an innovative, creative way. They decided to make their space work as hard as possible for them, in a (I imagine) fairly cost efficient way that could create buzz for their own firm, reinforce their products, and create a value exchange with attendees. 

Instead of filling their booth space with a pull up banner, a table, bored sales reps, and printed material, they brought in a small, branded cart and served vanilla ice cream. This created a buzz amongst attendees. 

The campaign messaging was oriented around their passive index suite, often deemed “plain vanilla beta,” in the industry. The activation was a play on the fact that while passive funds may be considered “boring” (aka plain vanilla), they are still a tasty option for your portfolios. 

Who doesn't like a nice afternoon treat? The activation created a value exchange with attendees through the offer of ice cream. “I remember eating various ice creams near their stand and talking to Fiona Bassett about it,” said Michael Camacho, head of U.S. wealth at UBS. 

Through the fog of time, I can't remember if they had toppings there to make sundaes. If they did, they could've taken the analogy even further, noting that plain vanilla funds (aka vanilla ice cream) are solid foundations for portfolios (for sundaes). 

Regardless, it was a cost-effective way to stand out in the crowd. The fact that it represented their product line up in an interesting, creative way makes it a top activation in my book - and other people share my opinion here. Julia Stoll, vice president at Goldman Sachs Accelerator said, “I… thought the campaign was brilliant.” 

J.P. Morgan Asset Management’s built to last experience 

This next activation is a personal point of pride, as it was the last and my favorite event sponsorship I planned and executed while at J.P. Morgan Asset Management (JPMAM). 

JPMAM’s brand is rooted in being a portfolio solutions partner; partnering with clients over time, and building products for investing over the long term. And so the campaign idea was generated with the phrase, “built to last, with your future in mind.” This concept was then threaded through the whole event experience.

Ahead of the event, we asked attending financial advisors to upload a portfolio “built to last” into JPMAM’s digital portfolio analysis tool and had the portfolio insights team analyze it against key risk measures. Not only is this a great lead capture opportunity, but advisor participation also fed the broader set of portfolio data. The winning “built to last” portfolio received a complimentary video interview with a media partner.

Outside of JPMAM ETFs, what is built to last? Steel. The traditional booth was made sexier with a metal reskin and metal accents throughout. For swag, we wanted to move away from the low cost tchotchkes sponsors provided in the past. As someone that is constantly purging my environment of clutter, I rarely grab swag and most seem beyond wasteful. We wanted to provide swag that was, well you get it by now, built to last. We sourced a selection of reusable options, including metal water bottles, luggage tags, and portable chargers.

In tying with the personalized touch that the JPMAM team provides, we brought in an engraving station at the booth so attendees could get their personal information engraved into their choice of metal swag. This was also a lead capture mechanism, as advisors had to “sign up” to participate in the engraving portion.

“Years later, and I still use my JPMAM water bottle and luggage tag today!” Noted Brian Coco of VettaFi. 

Lastly, we held a dedicated breakfast for financial advisors at the event. To break through the email noise that sponsors create ahead of the event, we physically mailed advisor registrants a printed invitation. The breakfast session featured portfolio construction experts walking through common portfolio scenarios of the time, providing them with guidance on how to construct a portfolio that is … built to last! Also, it was another opportunity to identify leads, as attendee information was captured when they participated in the session.

Why am I proud of this activation? The answer is two-fold. First, the campaign concept was threaded throughout for a focused, consistent message, and experience; the activation reinforced our brand and product line up. Second, we put in the work to create opportunities to connect with advisors at the event. An event can generate business opportunities - if you work it right!

Grayscale’s drone show

Want to break through the sponsorship noise and capture attendees attention? Sometimes spectacle is the answer.

At Exchange 2024, Grayscale coordinated a drone show in the night sky of the outdoor closing reception. 

For spectacle to succeed, it truly needs to impress and Grayscale did not disappoint. I've never seen hundreds of drones flying in a choreographed fashion in perfect coordination. Creating a visual representation of a bitcoin symbol, blockchain technology, the Grayscale firm name and their ticker would have been impressive on its own, but it was also paired with music and brilliantly choreographed. It was dare I say… beautiful and oddly moving? Plus, everyone of the thousands of attendees grabbed their phone and took photos of the activation. 

Talk about owning a moment with 100% SOV, attendee penetration and attention. Grayscale also complemented their splashy event with digital buys at local airports, following attendees from home base to the conference to build buzz and excitement before they even arrived. 

Their booth was visually stunning, to add to the strength of the entire execution. This is a minor detail, and many firms would have skipped on putting time and effort into their booth and instead relied on the spectacle of the drone show to carry their branding, but this care and attention to detail matters and lifts the entire experience.

What to remember

You can make an impact at an event no matter how small or large your budget. What’s important to remember is:

  • Figure out an activation idea or theme that is representative of your brand and core product offerings. Something that works to strengthen your message, versus distracts with an unrelated concept. Thread it throughout your whole experience. 
  • Think outside of the box to break through the noise other sponsors inevitably create. Go beyond traditional sponsorships and what sponsors typically do.
  • You want leads? Generate opportunities throughout your conference presence to capture them! Want brand exposure? Pick a primary goal and construct your sponsorship and presence to achieve it.

There may be no such thing as a free lunch. But for midstream, there can be instances where operating leverage allows for additional cash flow with little-to-no capital spending. A prime example would be an existing pipeline that is not fully utilized. Across midstream asset types and geographies, companies are pointing to the benefits of operating leverage or very capital-efficient growth. This note highlights a few examples and explains how operating leverage benefits midstream.

Natural gas volumes could rebound quickly if prices improve.

Natural gas production in the US is arguably a loaded spring for midstream gathering and processing assets once prices recover. Multiple gas producers shut in production this year due to weak prices. Essentially, it was better to keep natural gas in the ground than to sell it at depressed prices and worsen market oversupply. Some production has likely returned with seasonal price improvement. But more volume could be added relatively quickly if prices are supportive.

On their 3Q24 earnings call, Williams (WMB) discussed 4 billion cubic feet per day (Bcf/d) of natural gas production across their systems in the Marcellus and Haynesville that was connected but not producing. Management noted that some production curtailments from the summer were starting to come back. And production could rebound fairly quickly when prices improve, in some cases just requiring the turn of a valve.

Similarly, Kinder Morgan (KMI) noted plenty of capacity on gathering systems in the Eagle Ford if volumes ramp, though KMI would probably need to add processing capacity. In the Haynesville and Bakken, they would likely need to add lateral pipelines to connect into their larger existing pipelines. But they see the potential for efficient expansions for their gathering and processing businesses when production picks up.

Permian: More bang for the buck at each well site.

In the Permian, pipeline operators can enjoy operating leverage as producers become more efficient and drill more wells at existing pads. Efficiency gains by producers have been significant as noted by Plains All American (PAA/PAGP) in a recent interview with VettaFi, and drilling technology continues to improve.

Higher recoveries and larger developments mean gathering companies can utilize existing infrastructure and make fewer new connections. On their 3Q24 call, Plains noted that close to 40% of their gathering connections in the Permian already have pipelines and facilities in place. This capital efficiency has been ongoing for years and is expected to continue. Plains is forecasting that Permian oil production will eventually exceed 7 million barrels per day. That’s up from ~6.4 million barrels per day at year-end 2024.

Canada: New takeaway capacity supports production growth.

Earlier this month, Canadian midstream corporation Keyera (KEY CN) provided a multi-year EBITDA growth outlook largely underwritten by filling existing capacity. Infrastructure assets, including gas processing plants and pipelines, are expected to see increased utilization over time as Canadian energy production grows. Specifically, KEY guided to a compound annual growth rate of 7-8% for fee-based adjusted EBITDA from 2024 to 2027.

Production growth in Western Canada is supported by new incremental pipeline takeaway capacity for oil and natural gas, namely from the expansion of the Trans Mountain Pipeline and TC Energy’s (TRP CN) Coastal GasLink, respectively. Additionally, KEY highlighted increased drilling activity due to new land owners and the development of emerging plays. The company also plans to pursue capital-efficient growth projects. But most of the expected EBITDA growth is simply a matter of filling capacity with only modest capital required.

So what?

For midstream, major projects tend to garner more attention and are often more needle-moving for cash flows. That said, operating leverage can provide meaningful benefits as production grows. The ability to enjoy increased cash flows with modest or no capital spending is a good example of the value in existing pipelines and other infrastructure. Growth with little capital spending should be welcomed by investors.

This article was originally published December 19th, 2024 on ETF Trends.

Summary

MLPs have made significant changes for the better over the last decade, including reducing leverage, eliminating burdensome incentive distribution rights, and focusing on sustainable distribution growth.

Widespread free cash flow generation among MLPs has supported distribution growth and opportunistic buybacks.

Despite drastic improvements over the last decade, MLP EV/EBITDA multiples remain below long-term averages.

Many investors may be considering MLPs for the first time ever or the first time in many years given a reestablished track record for strong performance and steady distribution growth. Interest in midstream/MLPs has seemingly strengthened following the election. Today’s note is geared toward investors that may not be aware of the significant positive changes that have taken place over the last several years, including free cash flow generation, improved balance sheets, and equity buybacks. For new or returning investors, our MLP Primer may also prove a helpful resource.

Hefty spending replaced by free cash flow tailwinds

Investors may be surprised by how much MLPs have outperformed the S&P 500 in recent years. From the end of 2020 until December 10, 2024, the Alerian MLP Infrastructure Index (AMZI) has generated a total return of 194.4% compared to 70.6% for the S&P 500.

One of the major tailwinds for energy infrastructure MLPs since 2020 has been widespread free cash flow generation (read more). MLPs invested heavily in new infrastructure during the 2010s as US energy production boomed, building major pipelines with billion-dollar price tags and often issuing equity to help fund growth. Self-funding equity capital started to gain more traction in the MLP space in 2017-18, and equity issuances became less common. In 2020, the combination of reduced growth capital spending and new cash flows from completed projects drove a free cash flow inflection. Rather than issuing equity, MLPs began repurchasing equity.

In recent years, moderate US oil and natural gas production growth has required less infrastructure. Instead of building new projects, companies have often been able to expand existing assets like pipelines or export terminals resulting in more capital-efficient growth. This has helped keep capital spending in check, supporting free cash flow. According to Bloomberg, AMZI’s free cash flow yield as of December 13 is 8.2% compared to 2.7% for the S&P 500.

High leverage replaced by balance sheet strength

In the 2010s, hefty growth capital spending resulted in elevated leverage. A decade ago, it was common for MLPs to have leverage around 5x on a net-debt-to-adjusted-EBITDA basis. In addition to large capital budgets and debt loads, MLPs were also burdened by incentive distribution rights or IDRs (i.e. payments made to general partners as distributions to limited partners increased). As oil prices weakened from 2H14 to 1H16, MLPs struggled to raise equity. With many MLPs overextended and capital markets challenged, once-sacred distributions were cut, particularly by smaller MLPs. It was a painful period for MLP investors – many of whom exited the space.

MLPs learned valuable lessons from past challenges. Today, MLPs have already used excess cash to reduce debt and lower leverage. Most MLPs are targeting leverage at or below 4x, even as low as 3x (read more). Today’s stronger balance sheets can also add confidence to MLP payouts. IDRs have largely been eliminated. Only two names representing less than 15% of AMZI by weighting still have IDRs.

Reestablished track record of distribution growth complemented by buybacks

With balance sheets already improved, MLPs have used excess cash flow for distribution growth and opportunistic buybacks. Over 90% of AMZI by weighting has grown its distribution within the last year, and there has not been a cut to a regular distribution for an AMZI constituent since July 2021 (read more). Instead of focusing on growth at all costs, MLPs have prioritized sustainable distribution growth. Investors can have greater confidence in payouts today. As of December 13, AMZI was yielding 7.0%, which is particularly attractive as interest rates fall (read more).

While distribution growth has been the priority, MLPs have also been active with buybacks in recent years, albeit repurchases tend to vary (read more). Over 70% of AMZI by weighting has a buyback authorization in place as of December 10. Buybacks are a particularly strong example of how the space has changed given frequent equity issuances prior to 2015.

Despite improvements, MLP valuations still discounted

By all accounts, master limited partnerships are arguably in a much better position today than they were a decade ago. MLPs are generating free cash flow, growing distributions, and opportunistically repurchasing equity. Companies have simplified their structures, and balance sheets are stronger. The investment case is arguably as strong as it’s ever been.

Despite these drastic improvements, MLP valuations remain subdued. As of December 10, AMZI was trading at a weighted average EV/EBITDA multiple of 9.1x based on 2025 estimates or just 8.7x using 2026 consensus estimates from Bloomberg. The three-year average forward EV/EBITDA multiple is 8.8x, and the ten-year average is 9.9x. Even with strong performance in recent years, MLPs have not become expensive, and multiple expansion has not really materialized. This could be attributed to the niche nature of MLPs, their exclusion from broad market indexes, or perceived hindrances to directly owning MLPs, namely the Schedule K-1 issued for taxes. To be clear, investors can access MLPs through exchange-traded products, mutual funds, and other vehicles to receive a Form 1099 (read more).

Bottom line:
Investors revisiting MLPs should be aware of the broad improvements made by companies in recent years. MLPs represent a compelling investment opportunity given free cash flow generation and attractive yields, which are enhanced by ongoing distribution growth. Even with these improvements and strong performance, MLPs have not become expensive relative to history.

This article was originally published December 17th, 2024 on ETF Trends.

A new poll recently published by health policy research firm KFF revealed that roughly 12% of U.S. adults (or one in eight) have taken GLP-1 drugs, a category that includes Wegovy, Ozempic, Zepbound, and Mounjaro. Of those surveyed, 6% are currently taking a drug from that group.

Although many survey participants rely on these medications for other conditions like Type 2 diabetes, 38% are taking them for weight loss. This level of adoption is despite the high cost of these drugs, which runs $1,000 a month before insurance coverage. Patients, health providers, and insurance companies increasingly realize that the benefits far outweigh the costs.

Battling obesity

Obesity is a global problem affecting more than 1 billion people. The number of adults living with obesity worldwide is more than twice what it was in 1990, with 43% of adults now overweight, the World Health Organization notes. Furthermore, according to Morgan Stanley, there is a macroeconomic toll in addition to the mental and physical consequences for the population. The firm posits that the cost of adverse health outcomes and reduction in productivity whittles 3.6% off the gross domestic product of the U.S.

GLP-1 (glucagon-like peptide 1) drugs have been proven effective in promoting weight loss. GLP-1 is a hormone the body produces that is released when a person ingests food. It triggers cells in the pancreas that, in turn, produce insulin, which regulates blood sugar. GLP-1 drugs have been approved since 2005 as a treatment for type-2 diabetes. But new formulations of the drugs for obesity can now promote reductions in body weight by 10-20%.

A breakthrough disruption

For patients considering surgical options, GLP-1 drugs are being hailed as a "miracle drug." They are said to represent a major advancement in public health. This breakthrough status also carries with it the potential to disrupt other companies in health care. It has broad implications for many industries, from medical device makers to the food and beverage industry to airlines. A study looking at United Airlines finds that the company could save 27.6 million gallons of fuel per year, for $80 million, if the average passenger were 10 pounds lighter.

These drugs are not without side effects. However, data from the largest clinical trial of GLP-1's to date, the SELECT trial of approximately 18,000 non-diabetic participants, is compelling. The study published in November 2023 showed evidence of reduced incidences of heart attacks, strokes, and deaths from cardiovascular disease. Additionally, 73% of patients did not progress to diabetes. Subjects also saw a 19% reduction in all causes of morbidity. For patients, these are no doubt life-changing results.

GLP-1 drugs are a disruptive economic force, with Goldman Sachs estimating the market for GLP-1 drugs will grow to $100 billion by 2030. These new anti-obesity drugs could see a patient population as high as 70 million, resulting in an increase in U.S. GDP levels by as much as 1% in the coming years.

Our index approach

VettaFi is excited to launch the first Index, the VettaFi Weight Loss Drug & Treatment Index (THINR), to provide diversified exposure to this disruptive investment theme.

Eli Lilly and NovoNordisk, the Index's two largest holdings, currently dominate in terms of market share. That said, new market entrants and methods (like pills) are on the way, advocating for a more diversified approach.

The Index comprises 70% of drug developers/manufacturers and 30% of enablers.

  • Drug developers/manufacturers are pharmaceutical and/or biotech companies with either a branded GLP-1 agonist product or a product in the GLP-1 drug development pipeline in FDA clinical trials.
  • Enablers are companies involved with the outsourced development and manufacturing of GLP-1 agonist drugs. These are also known as contract development and manufacturing organizations (CDMOs). These companies conduct measurement and analysis of GLP-1 agonist drugs. This also refers to companies involved in the distribution or administration of GLP-1 agonist drugs. That would include the coordination of prescriptions and drug-delivery mechanisms such as injection pens.

To qualify for inclusion in the Index, companies must be members of the VettaFi S-Network Developed World Equity 5000 Index or the VettaFi Developed World Index and meet a minimum market capitalization requirement of USD 500 million. Constituents are float-adjusted market cap weighted within their segment allocation as outlined in the Index Methodology.

Given the fast-changing nature of the space, the Index is rebalanced on a quarterly basis. More information on our Index and backtested results can be found on VettaFi's website here. and our white paper here.

Since its live index inception on 1/25/24, the Index is up 18% YTD on a total return basis (as of 5/20/24).

An ETF tracking this index has been issued by Amplify ETFs.

 This article was originally published May 21st, 2024 on ETF Trends.

VettaFi hosted a webcast, Bring your brand to life with event activations, on December 3rd, 2024. VettaFi CMO Jon Fee moderated the discussion along with Cassie Hughes, Co-Founder and Chief Strategy Officer of Grow Marketing, and Kate Gunning, Founder and CEO of Crush Brand Advisory.

As the world becomes increasingly digital, many marketers have forgotten the power of live, in-person events. “As much as I continue to lean more and more digital, you can’t replace the power of looking someone in the eye in real life, shaking their hand, and learning about them,” Jon Fee said.

Experiential events

Fee opened the discussion by surveying attendees about whether they were using experiential marketing in their media mix. Over 40% of respondents claimed to not know enough about experiential marketing. 

Hughes noted that there is a difference between event activations and experiential marketing, though there is some overlap. “From our perspective, experiential marketing is anytime you are bringing people together in real life talking about a product or a service,” she clarified.

Events and sponsorships

56% of attendees claimed that events and sponsorships were somewhat important, but that they rely on other tactics more heavily, with 28% claiming events and sponsorships were very important.

Experiences fill you up with an emotive reaction to something; making people feel can also move them to take action.

Though real-life events do not technically reach as many people as digital engagements, they do move audiences farther and faster. “Deeper connections hold longer in the memory,” Hughes continued.

Gunning added, “Think about your own life and your world and how you feel when you have a combination of DMs and texts from a friend vs. a coffee date or a dinner.”

The digital and real-life combo

Gunning shared that, working for a large firm, she A/B tested doing just events and both events and digital marketing for a certain set of clients. The combination of both is invaluable; digital events complemented with in-person events are more powerful than doing either alone. 

Hughes shared some intriguing stats - 79% of US marketers generate sales using experiential marketing, and more than one in three CMOs set aside anywhere from 21% to 50% of their budgets for brand experiences. Additionally, 67% of B2B marketers think of event marketing as their most effective strategy.

Bringing the brand to life

Figuring out how to do live events and experiential marketing can be a challenge. “The key is the triangulation of partnership between marketing, sales, and the leadership team,” Gunning said. She also outlined the importance of planning for what happens after the event. Events can work on their own terms, but also create opportunities for follow up conversations and content.

Giving an example, Hughes quoted Peter McGuiness, CMO, Chobani, by pointing out, “everything is an event, but everything done well is an experience.” She shared how AirBnB and Barbie partnered for an experiential marketing campaign that was heavily promoted digitally and went viral, but focused on a real space and experience to break through the noise.

Debunking myths

Fee noted that a lot of hesitancy around event sponsorships comes from three myths:

  • Breaking through the noise is easy.
  • Only top-tier sponsors get recognition.
  • Events have weak ROI and are hard to track.

Gunning volunteered that tracking ROI involves having clear goals and a clear plan. For example, having people scan codes at a booth and knowing exactly what you are doing to facilitate that action can make ROI metrics easier to decipher. “What are the opportunities for connection with the audience you are going after?”

Hughes underscored most of the brands that fail to see the ROI of an event sponsorship don’t have clear goals. “Clear goals have ROI and there are ways to track it.” Departments working together is also essential. If marketing is delivering an event, sales needs to participate in it and not feel like it is silo’d off to just marketing but, instead, a shared opportunity.

“As you think about event ROI,” Fee said, “What I think folks often forget is just because the field of opportunity is right in front of you, that doesn't mean you show up without a plough. You still have work to do… It requires everyone to roll up their sleeves and get to work.”

Top sponsors don’t have a monopoly - good ideas shine through

One assumption many small or medium sized firms make is that it is hard to stick out against the big dogs. Hughes countered that the brands that stick out are the ones that do clever, inventive activations. In fact, top brands often only lean on their own name recognition to do the heavy lifting, which creates opportunities for other brands to execute clever activations. 

Smart activations create a value exchange. Breaking through the noise is a matter of being thoughtful about how you present your technology, your brand, or your service. Gunning added, “The way you break through the noise is by being relevant.” Hughes then shared an example from Google. Google had a rough go of introducing the Google Home products, but investing in a clever activation, helped connect the product’s use case and improve its position in the marketplace.

Fee noted, “Even Google has a hard time breaking through with new products.” In a similar way, big asset managers who haven’t touched the ETF space might have trouble breaking in despite their brand name.

Conference preparation

Preparation is critical to make a live event successful. “There’s a pre-, there’s a during, and there’s a post,” Hughes said, so she discussed the value of having an outline and plan for all. Using the Komen Walk from Exchange as an example, she noted finding natural activities at a conference where you can make connections is important. In addition, walking the expo hall can not only introduce you to new folks, but it can also inspire your future activations.

Gunning spoke to the value of structured time and open time. “I try to get deliberate about the 3-5 people I really want to meet,” she said. Then she uses the open time to map out where she wants to be stimulated or pursue learnings. “I love to use these settings to learn, observe, and see if I can pick up on patterns.”

The case for event sponsorships is strong

Firms of all sizes stand to benefit from event sponsorships and activations. Large firms can use the opportunity to appear more human and approachable. Medium-sized firms benefit from appearing next to industry leaders and have the opportunity to stand out with a smart activation, and smaller firms can leverage events to fuel growth. Regardless of firm size, you can rely on event sponsorships to reliably generate content and drive business goals.

Interested in learning more? Watch the full discussion here. 

Bring your brand to life with event activations at Exchange, learn more here.

What are ADRs?

American depositary receipts (ADRs) are financial instruments that allow U.S. investors to buy and sell foreign companies on U.S. stock exchanges. A U.S. bank issues a certificate representing a specific number of shares of the foreign company.  

ADRs allow U.S. investors to gain easy, liquid access to foreign companies without worrying about opening custody accounts, foreign currency conversion, and trading on foreign exchanges. ADRs are priced and pay dividends in U.S. dollars and adhere to U.S. financial reporting standards. The advantage for foreign companies is that by offering ADR versions of their shares, they can provide a convenient vehicle for U.S.-based investors to invest in their company.    

Pros & cons of owning ADRs

Pros

  • Easy to trade and track
  • Available through U.S. brokers and trading firms
  • U.S.-dollar-denominated
  • Provides international diversification without direct currency risk

Cons

  • Potential for double taxation (local and abroad)
  • Limited universe of names available
  • Subject to currency conversion fees

Direct indexing

Direct indexing is one of the fastest-growing segments of the financial services industry, with Cerulli Associates projecting separately managed account (SMA) assets of $2 trillion by the end of this year. 

Direct indexing allows advisors to customize or manage taxation in index portfolios. For example, if a client works for a company and has highly appreciated exposure to its stock, that company can be excluded from the direct index. Direct indexing also accommodates personalization, such as the expression of ESG and value-based screening. Additionally, direct indexing can be used to harvest tax losses and generate “tax alpha.”   

Direct indexing & ADRs

One of the challenges for direct indexing is how to best provide exposure to non-U.S. companies. ADRs are the perfect tool for this, but to date, only a handful of index providers offer ADR index exposure. Arising from this unmet need, VettaFi has created and launched a new suite of ADR Indexes.

VettaFi’s new ADR index family

VettaFi’s suite of ADR Indexes provides a broad range of international coverage using ADR-listed holdings, including developed and emerging markets, as well as full world exposures.

While there are far fewer ADRs than local exchange-traded foreign equities, each index has been constructed to minimize sector, country, and tracking error differences relative to the international equity index upon which it is based.  

These indexes will provide a valuable tool for accessing foreign markets in SMA and direct indexing portfolios.  

If you would like to learn more about VettaFi’s new ADR Index family, please contact the team here. 

One of the biggest challenges facing modern issuers is getting their products to stand out. As investing has become more accessible to the average person, the number of products available has increased to meet demand. But as investing continues to innovate and evolve, the amount of products available to investors has grown. In turn, this has created intense competition and obstacles for new products. 

As products evolve, so can problems

Understanding how we got to the current state of affairs is useful for unpacking how to solve the biggest challenges facing issuers.

Investing has come a long way from its early roots in trading commodities and debt. The creation of the precursor to the S&P 500 in 1923 marked a significant turning point. This index allowed investors to track broad market performance rather than individual stocks, fundamentally changing investment strategies.

Mutual funds emerged as another disruptive force. Starting in an early form in 1924, mutual funds combined risk mitigation through pooled resources with broad market tracking. Institutions and eventually retail investors gained access to diversified, liquid products.

The next big innovative jump came with Exchange-Traded Funds (ETFs). These transparent, flexible investment vehicles democratized the market further. If mutual funds were the Boston Tea Party, ETFs were the Battle of Saratoga. By 2020, over 3,000 ETFs were trading in the U.S. market, allowing investors to access previously inaccessible regions, sectors, and factors.

The crowded marketplace

While innovations widened market access, they also made it easier to create investment products. The SEC ETF Rule in 2019 streamlined the process, allowing more companies to launch ETFs. Over two decades ago, there were four issuers with 80 different ETF products. Today, there are over 200 issuers with more than 3,000 ETFs. Despite this proliferation, investors often stick to established names, with 75% of global AUM in mutual funds and ETFs being in products at least ten years old.

Standing out in a competitive landscape

With legacy products getting a huge part of the pie, issuers have resorted to lowering fees on newer products, which means that they need to cut costs in other areas. To thrive in the next decade, asset managers must rethink their innovation strategies, embracing new product categories and value-added services, all while competing with a host of existing and new products from other issuers. As daunting as this task can appear to be, there are ways to increase efficiency and grow AUM. Finding the right index can give a product a solid foundation.

VettaFi’s index services 

VettaFi offers a suite of solutions designed to empower asset managers to stand out:

Bring your product ideas to life and minimize risk

Whether you are starting from scratch or optimizing an existing index, VettaFi can turn your new product ideas into reality. Issuers can create their own customized investment products by utilizing VettaFi’s Index Factory, which allows the use of client-proprietary data, as well as 3rd party data to build any desired index. Customization ensures that indexes align precisely with specific investment goals and market views, reducing risk.

Flexible services tailored to you

VettaFi’s services cover daily calculations, corporate action handling, implementation of weighting rules, and fully outsourced administration. Efficient and accurate index management allows asset managers to focus on core investment strategies, freeing up resources for other services.

Reduce costs and attract investors

Investors interested in a specific theme or a disruptive sliver of the market, such as A.I., renewable energy, weight-loss drugs, or robotics, can capitalize on those ideas’ high growth potential. By leveraging VettaFi’s index licensing services, asset managers can reduce operating costs by replicating index performance in their investment products. This cost-efficiency enables managers to offer more affordable products and attract a broader investor base.

The takeaway

Asset managers who create cost-effective or hyper-customized products will thrive as investment opportunities multiply. VettaFi’s index services equip managers to navigate this evolving landscape, stand out, and meet the diverse needs of modern investors.

Interested in learning how to partner with us? Click here.  

Quality is a sought-after, fundamental investment factor whose origins in investment theory date back to the 1930s. Traditionally, quality companies are consistent in their earnings, profitable, and solvent. Firms that have these traits fall under the quality factor umbrella.

However, finding the right quality screens is important, as recent market events have impacted many firms that have fallen under the traditional umbrella of quality.

Quality reimagined in the wake of COVID-19

The COVID-19 pandemic created a surge in the total debt of nonfinancial businesses. After a decade of debt growth averaging roughly 5.5%, debt jumped 9.1% in 2020. On the heels of COVID-19, increased inflation led to higher interest rates. 

This means more firms have more debt that will be harder to refinance. Even firms that traditionally succeeded at being considered examples of quality investing are now contending with higher debt and less ability to navigate that debt successfully. Companies that would otherwise introduce stock buybacks or pay out dividends must instead direct more earnings toward clearing outstanding debt. 

Getting the right quality screen

Screening for quality has arguably never been more important. Solvency is critical. In 2022, almost half of all publicly listed firms were unprofitable despite fewer firms declaring bankruptcy.

VettaFi’s Quality Indexes measure the performance of U.S. companies, focusing on the highest quality scores. Profitability and solvency are targeted, and sector restraints and market cap weight are considered. (A full breakdown of the methodology is covered here.)

The VettaFi US Large/Mid-Cap Quality Index outperformed the benchmark VettaFi 1000 Index, which comprises the largest 1,000 publicly traded stocks in the U.S. market. 

Learning more about VettaFi’s approach to quality

Interested in learning more about how the VettaFi US Large/Mid-Cap Quality Index is constructed? Our recent white paper explores our approach to the new quality factor. Download the paper here.

Want to use the VettaFi US Large/Mid-Cap Quality Index or leverage our index factory to create your product? Speak to our index specialists today.

VettaFi announces that its fast-growing index business has successfully completed its first independent audit of its statement of adherence with the IOSCO principles for financial benchmarks

Focus on index processes, governance, controls, and operations is core to VettaFi’s highly differentiated approach

VettaFi, a global leader in indexing, data & analytics, and digital marketing for asset managers, is today announcing that after a thorough assurance engagement by an independent accounting and professional services firm, VettaFi’s index business has completed its first audit of its adherence with the International Organization of Securities Commissions (IOSCO) Principles for Financial Benchmarks. A limited assurance opinion was issued as of June 30, 2023, by PricewaterhouseCoopers LLP.

The IOSCO principles have been the industry standard for more than a decade and cover best practices in governance, accountability, quality and transparency of benchmark design, and more.

“My colleagues and I could not be more pleased with the results of this review,” said Brian Coco, Head of Index Products for VettaFi. 

We are building a world-class indexing business, so it only makes sense that we would want to ensure we are adhering to the global standard for financial benchmarks.
Brian Coco
Head of Index Products 

The full Statement of Adherence and detailed results of the audit, as well as the scope of the indexes included within audit, can be requested from VettaFi.

This announcement caps what has been a busy six-month period for VettaFi indexing. In April, the firm announced the acquisition of the ROBO Global suite of indexes, a leader in powering research-driven disruptive technology portfolios. Just last month, the firm also announced the acquisition of EQM Indexes, an innovative provider of custom and thematic indexing solutions.

These acquisitions, coupled with numerous new client partnerships and organic growth among VettaFi’s existing clients, have pushed the total amount of assets tracking VettaFi benchmarks to nearly $19 billion. More recently, VettaFi launched its new Global Developed Benchmark Series as part of its 2023 index innovation roadmap.

“When we set out to create what is now VettaFi, my colleagues and I knew that solving the industry’s biggest indexing challenges was going to be core to our mission,” said Leland Clemons, CEO of VettaFi.” We have since added new capabilities and brought on some of the most respected talent in the business to deliver this foundation and further align our capabilities to support our clients’ growth ambitions.

“Today’s announcement highlights that even as we’ve been driving growth with our clients and partners, we have never lost sight of doing things the right way. I’m thrilled for our Indexing team and their steadfast adherence to IOSCO, and equally as excited to continue to tell the VettaFi indexing story to the marketplace,” he added.