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Monday, April 13, 2015

An Indexer Charges Head-First Into ETF Territory

Reported by Neil Anderson, Managing Editor

A risk-focused index developer is charging deeper into the ETF business with its own fund lineup. An iShares and Guggenheim alumnus will lead distribution for the new effort.

Mark Thomas, managing director of San Francisco-based Lattice Strategies, confirms that in January Valentina Glaviano joined up as distribution chief. Thomas expects Lattice to add more distribution staff soon.

"We are building our sales team as we speak," Thomas says.

Glaviano's hiring comes as Lattice is launching its own ETFs for the first time. On February 26, Lattice's first three ETFs -- the Lattice Emerging Market Strategy ETF (ROAM), the Lattice Developed Markets (ex-US) Strategy ETF (RODM), and the Lattice US Equity Strategy ETF (ROUS) -- debuted on the NYSE, and on March 24 Lattice launched its Lattice Global Small Cap Strategy ETF (ROGS).

Lattice is new only to running its own ETFs, not to the ETF business in general. Ted Lucas, managing partner at Lattice, notes that several years ago Lattice custom designed three indexes to power three ETFs for an institutional client. And Lattice's own liquid endowment strategies date back to 2007. As of December, Lattice counted about $1.7 billion as managed by Lattice or tracking Lattice-developed strategies or indexes.

"We think of ourselves as 'risk-first' investors," Lucas tells MFWire. "We try to think about risk much more comprehensively."

The idea behind Lattice's strategies and indexes, Lucas explains, is for investors to be mindful of which risks they're taking in which parts of their portfolios.

"We're in the business of systematic allocation of risk," says Darek Wojnar, an iShares veteran who joined Lattice last year as managing director, contrasting Lattice's approach with the "whack-a-mole risk allocation" approach they often see in the marketplace.

"It's managing risk at the last mile of portfolio," Thomas adds.

Thomas says that "sophisticated asset allocators," as well as ETF strategists, RIAs, and other institutional investors are prime targets for using Lattice's new ETFs. And Wojnar says that Lattice has been approached by due diligence teams from broker-dealers and their wealth management arms.

"Do clients understand what a systematic, deliberate allocation of risk is?" Wojnar asks rhetorically. "There is definitely an opportunity to understand dimensions of risk ... Risk an inherent part of investment. We advocate for investors to be deliberage with which risks they want to hold."

As for Glaviano, she is an alumnus of UCLA. She previously worked at Bankers Trust, Lazard, iShares (now part of BlackRock), Guggenheim Partners, Altegris Investments, and most recently MS Consulting. 

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