Finance

Goldman Sachs helps its clients launch ETFs

Published

11 months ago

April 2, 2024

Redefining "active" investing... and how it comes to market

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.”

Disclaimer