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Friday, June 10, 2016

Is the ETF Seeding Cycle Slowing Down?

News summary by MFWire's editors

The business of launching ETFs is changing. So reports Reuters' Trevor Hunnicutt, who digs into shifts in market makers' ETF seeding efforts.

William Belden
Guggenheim Investments
Managing Director
Three ETF shop executives -- Guggenheim Investments [profile] ETF business development chief William Belden, Summit Global Management managing director Matthew Dickerson, and ALPS Advisors [profile] ETF chief Michael Akins -- all weighed in for the article. And two ETF capital provider executives, Esposito Securities president Mark Esposito and Cantor Fitzgerald senior managing director Reggie Browne (known as "the Godfather of ETFs"), also spoke up.

Reuters sees "more skepticism" from ETF market makers evaluating ETFs to seed and sees those market makers investing less seed capital ("as little as $2.5 million," down from $25 million to $50 million in the past) in each new ETF. That's all while those market makers are having to wait longer, up to six months or more as opposed to just two months in the past, to get that seed capital back. That means more ETF seed capital is tied up for longer, instead of returning quickly for reseeding in another ETF, and that means longer waits for those ETF shops looking for such capital.

"I don't think you're seeing a ton of new seed capital," Guggenheim's Belden tells Reuters.

"Perhaps we're getting overheated with the number of products coming to market," ALPS' Akins tells Reuters. "But you don't want to limit innovation." 

Edited by: Neil Anderson, Managing Editor

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