Finance
Goldman Sachs helps its clients launch ETFs
Investor demand for exchange-traded funds is not slowing down, and firms without ETF offerings may risk losing business, according to one Goldman Sachs expert.
Steve Sachs, global chief operating officer of Goldman’s ETF Accelerator, notes that despite the time and resources required to launch an ETF, not offering current and new investment strategies as ETFs may prove even more costly.
“Any number of our clients would tell you, the opportunity cost of not [offering ETF products] is greater,” he recently told CNBC’s “ETF Edge.”
If a firm does not have ETF offerings, Sachs thinks “eventually those assets are going to leave and go to a competitor that does.”
To help clients through the process of launching their own ETF products, Goldman Sachs created its ETF Accelerator, a digital platform that helps clients launch, list and manage their own ETF products. The accelerator launched in 2022 in response to what Sachs described as significant client demand.
“Our core institutional clients were calling and asking, ‘How do we get into this ETF space? How do we deliver our strategy, active and otherwise, in an ETF wrapper?'” he said.
According to Sachs, client inquiries about launching ETFs surged following the passage of SEC Rule 6c-11 in 2019, which intended to help these funds launch more efficiently.
“While we wouldn’t call that a big boom, it was certainly a catalyst. The idea was it made it easier to launch an ETF, but it didn’t make it easy,” Sachs said. “At one point, we had more than 41 clients that had called us with exactly the same problem: ‘How do I do this, how do I move quickly and can you help us?'”
It can still take years to build the expertise, headcount and risk management framework necessary to launch an ETF, said Sachs. That is where Goldman’s accelerator platform aims to help.
“[It] allows our clients to come in, launch, list and manage their own ETF — but do it off of the technology, infrastructure and risk management expertise that Goldman’s known for and essentially get to market faster and cheaper than they could do it on their own,” Sachs said.
Since its inception, the accelerator has facilitated the launch of five ETFs. The most recent is Eagle Capital Management’s Select Equity ETF (EAGL), which listed last week.
Other ETFs launched through the accelerator include GMO’s U.S. Quality ETF (QLTY) and three funds from Brandes Investment Partners: the Brandes Small-Mid Cap Value ETF (BSMC), U.S. Value ETF (BUSA) and International ETF (BINV).
“GMO, Brandes [and] Eagle Capital all felt that the journey to build it on their own would be too expensive and too long,” Sachs said. “They didn’t want to miss the opportunity cost of not delivering their investment strategies in the wrapper.”
Walmart stock may be a steal.
Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.
“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.
But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.
“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”
Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.
“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”
Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.
Simon thinks the sell-off is bizarre.
“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”
It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.
But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.
“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.
Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.
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Investors may want to reduce their exposure to the world’s largest emerging market.
Perth Tolle, who’s the founder of Life + Liberty Indexes, warns China’s capitalism model is unsustainable.
“I think the thinking used to be that their capitalism would lead to democracy,” she told CNBC’s “ETF Edge” this week. “Economic freedom is a necessary, but not sufficient precondition for personal freedom.”
She runs the Freedom 100 Emerging Markets ETF — which is up more than 43% since its first day of trading on May 23, 2019. So far this year, Tolle’s ETF is up 9%, while the iShares China Large-Cap ETF, which tracks the country’s biggest stocks, is up 19%.
The fund has never invested in China, according to Tolle.
Tolle spent part of her childhood in Beijing. When she started at Fidelity Investments as a private wealth advisor in 2004, Tolle noted all of her clients wanted exposure to China’s market.
“I didn’t want to personally be investing in China at that point, but everyone else did,” she said. “Then, I had clients from Russia who said, ‘I don’t want to invest in Russia because it’s like funding terrorism.’ And, look how prescient that is today. So, my own experience and those of some of my clients led me to this idea in the end.”
She prefers emerging economies that prioritize freedom.
“Without that, the economy is going to be constrained,” she added.
ETF investor Tom Lydon, who is the former VettaFi head, also sees China as a risky investment.
“If you look at emerging markets… by not being in China from a performance standpoint, it’s provided less volatility and better performance,” Lydon said.
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