Behind Goldman Sachs’ venture into the ETF launch business: 5 questions with Lisa Mantil, Global Head of Goldman Sachs ETF Accelerator
- Goldman Sachs' plans to get into the ETF launch business have come to fruition sooner than expected amid muted market conditions.
- The investment bank has recently launched three funds through its Goldman Sachs ETF Accelerator, the bank’s newly created business unit and a digital platform.
Goldman Sachs indicated its intention to get into the business of helping asset managers launch ETFs in November 2022. The plans have come to fruition sooner than expected amid muted market conditions, as the investment bank has recently launched three funds from Brandes Investment Partners through its Goldman Sachs ETF Accelerator.
The Accelerator is the bank’s newly created business unit and a digital platform that enables its institutional clients to launch, list, and manage their ETFs.
The Brandes U.S. Small-Mid Cap Value ETF (BSMC), the Brandes U.S. Value ETF (BUSA), and the Brandes International ETF (BINV) are actively managed funds with a focus on investing in undervalued equities.
Growth in the ETF market has been particularly strong in the US. The US ETF industry has exceeded $6.5 trillion in Assets Under Management (AUM) since 1993, with currently under 3,000 ETFs in the market. Nearly 75% of investors said ETFs have improved the overall performance of their portfolio, according to a recent survey. Data also shows that active ETFs grew at an organic rate of 14% during the first half of 2023. These statistics indicate that the ETF landscape might be embarking on the next stage of growth.
I spoke with Lisa Mantil, global head of Goldman Sachs ETF Accelerator, to discuss what led the Wall Street bank to wade into the ETF business and what is Goldman’s precise role in the creation of ETF funds through its Accelerator.
What’s the purpose behind Goldman Sachs’ ETF Accelerator?
Lisa Mantil, GS: The Accelerator is a first-to-market institutional and outsourced solution to launch, list, and manage ETFs, built in direct response to client demand.
What’s unique about the business is that we operate as a service provider as opposed to a white labeler, meaning we are not the advisor or subadvisor. We provide services across fund launch and integration into the ETF ecosystem, along with portfolio implementation and capital markets solutions, but the ETF is the client’s ETF. It’s their brand, their investment strategy, and their assets.
What led Goldman Sachs to set foot into the ETF launch business?
Lisa Mantil, GS: Our entry into this market comes in direct response to our clients as they have been calling us asking for our guidance on how to enter the active ETF space. We are hearing that the decision to enter the ETF space for many managers has recently turned from an offensive strategy to a defensive one. Our clients recognize that being in the ETF space is a key aspect of evolving their businesses, but that journey is harder than they thought.
ETFs are the fastest growing part of the investment management industry and actively managed ETFs in particular have been gaining increased market share and investor attention. So there’s been a big trend and growing interest amongst investment managers to enter the ETF space, whether that’s via mutual fund or separately managed account conversions or bringing new strategies to market. But there are many barriers to entry and the process is labor intensive and requires a large investment of time, people, and capital – something that we have continued to hear from our clients. They want to enter the ETF space, but to do so they either had to build it in-house, which takes a lot of people, a lot of tweaks to infrastructure and a long time, or they had to buy an existing ETF issuer. So we built this business to introduce a third option: a first-to-market institutional outsourced solution that helps clients get their ETF ideas to market faster and more efficiently.
What is Goldman Sachs’ precise role as an ETF service provider?
Lisa Mantil, GS: Goldman Sachs ETF Accelerator provides services across fund launch, project management, and key custody and vendor integrations into the ETF ecosystem, along with portfolio implementation and capital markets solutions.
We offer access to a full suite of ETF experts, specific ETF solutions, and proven processes that significantly cut down on the time and cost it takes to launch and manage an ETF. As a service provider, we are delivering a solution that gives our clients the opportunity to leverage our expertise, our risk management mindset, and our innovative ETF-first technology capabilities, while ensuring that they retain 100% control over their ETFs.
Where do ETFs stand now and can further growth be expected ahead – 5 years from now?
Lisa Mantil, GS: As ETFs continue to gain traction, I think the next wave of growth in the space is going to be the active ETF. Actively managed ETFs are booming in popularity, and I think the space will continue to gain interest beyond traditional asset managers. In conversations with clients, we’ve seen increased interest amongst other institutional clients like hedge funds, insurance companies, family offices, RIAs, and pension funds to deliver their investment strategies within the ETF wrapper for greater transparency, tradability, and efficiency.
We’re also seeing interest across regions, for example with US-based clients looking to launch ETFs in Europe and European-based clients looking to launch funds in the US, so I believe this trend will only continue to become more global.
How can ETFs fuel competition in the investment and asset management landscape?
Lisa Mantil, GS: The ETF industry has seen tremendous growth over the last 30 years and has been directly disrupting the broader investment management landscape since. Much of the impact derives from the advantages the ETF structure provides compared to other investment vehicles. Advantages like liquidity, transparency, and greater tax efficiency have encouraged investors and advisors to allocate to ETFs. Additionally, ETFs are exchange-traded and are accessible across various platforms, which offers greater access for a broader swath of investors to participate, from retail investors to advisors, and institutional use cases.
We believe, particularly due to the growth of the active ETF space and with more investment managers launching their strategies in the ETF vehicle, naturally more competition will arise. But there is still so much room for opportunity as active ETFs only make up a small percentage of overall US-listed ETF assets despite increased interest. We’re excited by the momentum ETFs are seeing and the growth we should continue to see in the next decade and beyond.