Sub-Adviser Q&A With Vident Asset Management

Rafael Zayas, Senior Vice President and Head of Portfolio Management & Trading, Vident Asset Management
Danielle Rutsky, Senior Product Manager, Nasdaq ETP Listings

What are some of the various ETF strategies for which Vident is a sub-adviser?

Vident is a multi-asset platform that manages strategies for nearly 30 ETF issuers, ranging from US and global equity strategies to commodities to fixed income; and more recently we’ve added numerous options-based strategies to our roster as well. We also sub-advise crypto strategies, including futures-based funds. Also notable is the growing number of established asset managers with whom we have been busy partnering to help them add ETFs to their existing product lineups.

What are the different aspects of the ETF structure on which Vident can advise ETF issuers?

For asset managers that have already found success in certain product wrappers such as SMAs or mutual funds, we spend a great deal of time educating them on capital markets for ETFs, as well as trading and operational requirements. From a capital markets perspective, asset managers need to learn how to monitor how their ETF itself trades, not just how the strategy's constituents trade. For many issuers, this requires developing or updating new policies and procedures. Mutual fund experience gets firms a lot of the way towards where they need to be, but sponsoring ETFs add numerous more responsibilities. This is where Vident can be a great partner in guiding issuers as to how ETF requirements compare and contrast to their existing procedures.

How important is it for issuers to consider portfolio construction before launching their ETF?

ETFs have been such a hotbed for innovation that some issuers think anything can go in an ETF. But the reality is much different. For example, if an ETF’s strategy includes holdings that are difficult for market makers to hedge, these teams, which are crucial to the successful launch and running of any ETF, may not want to get involved, leaving a fund hamstrung before it has even made it to listing day. We prefer to consult with managers well before launch on how, and if, their approach might fit in an ETF, the ecosystem in which they’ll need to fit to survive and thrive, the ways in which their decisions can impact the liquidity of the ETF itself as well as other trade-offs they made need to consider. Most new issuers also need to understand what it means for an ETF to have daily transparency, and how that impacts the ways in which they may want to get into or out of positions.

What does Vident expect for the ETF industry in the next 12 months?

Continued growth! We see a lot of very successful asset managers still seeking to enter the ETF space and bringing their clients, brand, and assets into this vibrant category. More specifically, we expect pockets of innovation such as options strategies and single-treasury products to continue to blaze new trails and be successful. We still think there is plenty of room for new ideas to add texture to the ETF landscape.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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