THE TOROSO ETF INDUSTRY INDEX Ticker: TETF Index

Transcription

1 THE TOROSO ETF INDUSTRY INDEX Ticker: TETF Index THE ETFs ECOSYSTEM: ACCESSING KEY GROWTH TRENDS October, 2017

2 TABLE OF CONTENTS 1. ETF INDUSTRY OVERVIEW & GROWTH 2. ETF INDUSTRY INDEX DESCRIPTION 3. TEAM 2

3 BRIEF HISTORY OF THE ETF INDUSTRY $3 TRILLION IN AUM* FIRST US ETF LAUNCH JAN 1993 FIRST SECTOR ETF DEC 1998 FIRST BOND ETF JUL 2002 FIRST GOLD ETF NOV 2004 FIRST ETN JUN 2006 FIRST ACTIVE ETF MAY 2009 US ETF ASSETS SURPASS $2 TRILLION DEC FIRST INTERNATIONAL ETF MAR 1996 MSCI EAFE IN ETF AUG 2001 MSCI EMERGING MARKET IN ETF APR 2003 FIRST SMART BETA ETF DEC 2005 FIRST VOLATILITY INDEX ETF JAN 2009 US ETF ASSETS SURPASS $1 TRILLION DEC 2010 TOROSO ETF INDUSTRY INDEX LAUNCH APRIL 2017 * AS OF JULY

4 ACCELERATED INDUSTRY GROWTH ETFs continue to shine, surpassing $3 Trillion in overall assets. After setting record flows for each of the past 3 years ( ), flows in ETFs thus far in 2017 have already set the record again, with over $300 billion in flows year to date. ETFs saw flows of $241B in 2014, $245B in 2015 and $288B in , , ETF Asset Growth, in $500 billion steps 2, , , , $0-500 billion Over 14 years $500-1,000 billion 3 years, 4 months $1-1.5 trillion 2 years 7 months $1.5 2 trillion 1 year 5 months $2-2.5 trillion 2 years $2.5 3 trillion 6 months billion pace Total ETF Assets Source: ETFGI 4

5 THE FUTURE OF THE ETF INDUSTRY Global ETF AUM set to exceed $7 trillion by 2021 While AUM in ETFs continues to experience high growth, it is still only a third of the size in mutual funds this represents a large opportunity for growth 5

6 EXPECTED FUTURE GROWTH US ETF Vs MUTUAL FUND FLOWS After setting record flows for each of the past 3 years ( ), flows in ETFs thus far in 2017 have already set the record again, with over $300 billion in flows year to date. At this time mutual funds still enjoy some what of an artificial distribution benefit that may soon end (401k s etc). 6

7 TABLE OF CONTENTS 1. ETF INDUSTRY OVERVIEW & GROWTH 2. ETF INDUSTRY INDEX DESCRIPTION 3. TEAM 7

8 THE TOROSO ETF INDUSTRY INDEX EXPOSURE TO THE ENTIRE ETF ECOSYSTEM Includes companies that derive revenue from the Exchange Traded Funds industry The rise of passive investing - exchange-traded funds, index funds and the like has revolutionized the investment world New York Times, Mar 2017 ETFs could see $1 trillion in inflows over the coming year Market Watch, Jan

9 THE TOROSO ETF INDUSTRY INDEX Bi-annually, the Index Committee evaluates selected companies to determine their weighting within the Index based on a defined criteria described below. INITIAL UNIVERSE We first examine any public or private company above $200 million in Market Cap that participate in the industry SELECTED COMPANIES Currently, there are 37 companies generating significant revenue from the ETF Industry TIER A TIER B TIERED WEIGHTING 50% 25% SUBSTANTIAL PARTICIPATION / DIRECT FINANCIAL BENEFIT SUBSTANTIAL PARTICIPATION / INDIRECT FINANCIAL BENEFIT TIER C 15% MODERATE PARTICIPATION / INDIRECT FINANCIAL BENEFIT TIER D 10% NEW OR MINOR PARTICIPATION All participants are equal weighted within in the tiers and are subject to a 9% maximum weight for any one security within in a tier. 9

10 THE TOROSO ETF INDUSTRY INDEX 10

11 THE TOROSO ETF INDUSTRY INDEX 11

12 THE RESULT PORTFOLIO CHARACTERISTICS MARKET CAP BREAKDOWN TETF INDEX OVERLAP HOLDINGS OVERLAP OVERLAP ACTIVE SHARE S&P % 94.71% DJ FINANCIAL SERVICES INDEX % 77.93% LARGE CAP > $10 B 27 companies 62.80% of portfolio MID CAP $2-10 B 11 companies 19.70% of portfolio SMALL CAP < $2 B 5 companies 13.80% of portfolio TETF INDEX OVERLAP HOLDING COMPARISON HOLDINGS IN TETF ALSO IN BM HOLDINGS IN BM ALSO IN TETF S&P % 3.96% DJ FINANCIAL SERVICES INDEX 46.51% 29.85% OVERLAP, ACTIVE SHARE AND HOLDINGS ARE THE COMPARISONS AGAINST THE ETF INDUSTRY ETF INDEX SECTOR BREAKDOWN Sponsors 48.2% Exchanges 17.2% Index/Data Providers 15.2% Service Providers 10.6% Liquidity Providers 8.7% 0% 10% 20% 30% 40% 50% 60% SOURCE: MORNINGSTAR DIRECT 12

13 Index Subsector CAPTURING SUSTAINABLE GROWTH INDEX SUBSECTOR MARKET CAP (MIL) P/E RATIO P/B RATIO P/S RATIO P/C RATIO SPONSOR EXCHANGEs INDEX/DATA PROVIDERS SERVICE PROVIDERS LIQUIDITY PROIDERS $ 51, $ 21, $ 22, $ 41, $ 2, Toroso ETF Industry Index EPS Growth TOROSO ETF INDUSTRY INDEX $ 36, Sponsor INDEX SUBSECTOR DEBT TO CAPITAL % NET MARGIN % ROA % ROE % SPONSORS Index/Data 7.05 EXCHANGES INDEX/DATA PROVIDERS Exchange SERVICE PROVIDERS Service 7.62 LIQUIDITY PROVIDERS TETF INDEX Liquidity 1.99 INDEX SUBSECTOR EST SALES GROWTH EST EPS GROWTH SPONSORS EXCHANGES SOURCE: MORNINGSTAR DIRECT INDEX/DATA PROVIDERS SERVICE PROVIDERS LIQUIDITY PROVIDERS TETF INDEX

14 3/31/2017 4/5/2017 4/10/2017 4/15/2017 4/20/2017 4/25/2017 4/30/2017 5/5/2017 5/10/2017 5/15/2017 5/20/2017 5/25/2017 5/30/2017 6/4/2017 6/9/2017 6/14/2017 6/19/2017 6/24/2017 6/29/2017 7/4/2017 7/9/2017 7/14/2017 7/19/2017 7/24/2017 7/29/2017 8/3/2017 8/8/2017 8/13/2017 8/18/2017 8/23/2017 8/28/2017 9/2/2017 9/7/2017 9/12/2017 9/17/2017 9/22/2017 9/27/ /2/ /7/ /12/ /17/ /22/ /27/ /1/ /6/ /11/ /16/ /21/ /26/2017 INDEX PERFORMANCE Toroso ETF Industry TR USD KBW Nasdaq Bank TR USD S&P Financial Select Sector TR USD S&P 500 TR USD Source: Morningstar Direct 14

15 TABLE OF CONTENTS 1. ETF INDUSTRY OVERVIEW & GROWTH 2. ETF INDUSTRY INDEX DESCRIPTION 3. TEAM 15

16 INDEX COMMITTEE TEAM The function of the index committee is to interpret the revenue, public statements and other financial data on the companies within the investable universe. Although the primary factor governing the tier selection is ETF industry revenue data, the index committee may adjust for intangible assets and other nonfinancial, public information. The index committee includes five members: two from Toroso and three independent ETF industry veterans. The committee seeks consensus on all tier selections INTERNAL MEMBERS GUILLERMO TRIAS PARTNER & CEO TOROSO INVESTMENTS INDEPENDENT MEMBERS BURTON MALKIEL PROFESSOR EMERITUS SCOTT MARTIN CHIEF INVESTMENT OFFICER KINGSVIEW MICHAEL VENUTO CO-FOUNDER & CIO TOROSO INVESTMENTS KEVIN CARTER FOUNDER BIG TREE CAPITAL KRIS MONACO CO-FOUNDER & MANAGING PARTNER LEVEL ETF VENTURES RESEARCH DAVID DZIEKANSKI PORTFOLIO MANAGER TOROSO INVESTMENTS LINDA ZHANG, PH.D FOUNDER PURVIEW INVESTMENTS 16

17 INDEX COMMITTEE TEAM MEMBERS GUILLERMO TRIAS PARTNER & CEO TOROSO INVESTMENTS Guillermo Trias is CEO of Toroso Investments. Prior to Toroso, Guillermo led the strategy and business development efforts at Global X Funds helping the company reach approx. $4 billion in AUM. Previously, he was the founder and managing partner of two venture capital firms (MC Capital and GT Capital) dedicated to the incubation and growth of start-ups in the US and Latam. Prior to that, he was founder and CEO of a pioneer distributor in the US. Guillermo began his career in the area of M&A investment banking with Bankers Trust & Deutsche Bank. He has a degree in Business Administration from CUNEF (top finance college in Spain) and holds an MBA from the Kellogg School of Management (Northwestern University) in Chicago. Michael J. Venuto is Co-Founder and Chief Investment Officer of Toroso Investments, LLC. of multiple strategic investments and partnerships related to ETFs, Exchanges and Indexation. MICHAEL VENUTO CO-FOUNDER & CIO TOROSO INVESTMENTS His most recent position was Head of Investments at Global X Funds where Michael provided portfolio optimization services to institutional clients. Previously he was Senior Vice President at Horizon Kinetics where his responsibilities included new business development, investment strategy, client and strategic initiatives. Michael was instrumental in the establishment In 2014, Michael was chosen as one the ETF.COM All Stars for his research and is often quoted as an ETF expert in publications such as Reuters and Barron's. Michael Venuto studied Philosophy and Religion at NC State University and is an avid Chess player. 17

18 INDEX COMMITTEE TEAM MEMBERS BURTON MALKIEL PROFESSOR EMERITUS Is an American economist and writer most famous for his classic finance book A random walk down wall street. He is a leading proponent of the efficient-market hypothesis, which contends that prices of publicly traded assets reflect all publicly available information, although he has also pointed out that some markets are evidently inefficient, exhibiting signs of non-random walk. Malkiel in general supports buying and holding index funds as the most effective portfolio-management strategy, University, and is a two-time chairman of the economics department there. He served as a member of the Council of Economic Advisers ( ), president of the American Finance Association (1978), and dean of the Yale School of Management ( ). He also spent 28 years as a director of the Vanguard Group. He currently serves as Chief Investment Officer to software-based financial advisor, Wealthfront Inc. and as a member of the Investment Advisory Board for Rebalance IRA Malkiel is the Chemical Bank chairman's professor of economics at Princeton 18

19 INDEX COMMITTEE TEAM MEMBERS LINDA ZHANG, PH.D FOUNDER PURVIEW INVESTMENTS Linda H Zhang, Ph.D, is the founder of Purview Investments, a firm specializing in active ETF research and ETF managed solutions. She established her career to asset management, with extensive expertise in building ETF managed solution business, ETF research and execution, macro investment research and portfolio management. She was a lead PM at BlackRock's Multi-Asset Solution Group, managing global multi-asset mutual funds and institutional mandates. She was the Head of Quant Strategy Group at State Street Research prior to the acquisition by Blackrock. Dr. Zhang is a co-founder of Women in ETFs. She is a recipient of the Top Women in Asset Management Awards 2015 by Money Management Executive. SCOTT MARTIN CHIEF INVESTMENT OFFICER KINGSVIEW Scott D. Martin is Chief Investment Officer of Kingsview Asset Management. Mr. Martin began his highly regarded career at Astor Asset Management in Chicago, where he was co-portfolio manager on all of Astor s ETF-based separate account programs as well as on Astor s mutual fund complex, which was launched in At the company, he and his team were named one of the Best ETF managers of 2008 by Forbes and he was author of the weekly Astor Long/Short Balanced Update newsletter, which received the NAAIM President s Award for excellence in financial newsletter writing. A frequent speaker and lecturer, Mr. Martin has been featured in print and broadcast media such as The Wall Street Journal, Investor s Business Daily, and Yahoo! Finance. He is a former columnist with TheStreet.com and sits on the Advisory Board at Turning Point USA, a movement to encourage youth participation and involvement in government. Mr. Martin currently holds the series 65, as well as life, health and variable insurance licenses.. 19

20 INDEX COMMITTEE TEAM MEMBERS KEVIN CARTER FOUNDER BIG TREE CAPITAL KRIS MONACO CO-FUNDER & MANAGING PARTNER LEVEL ETF VENTURES Kevin T. Carter is the Founder of The Emerging Markets Internet ETF (NYSE: EMQQ). Mr. Carter is also the Founder of Big Tree Capital an investment manager focused on Emerging & Frontier Markets. Mr. Carter was the Founder & CEO of AlphaShares, an investment firm that offers five Emerging Markets ETFs in partnership with Guggenheim Investments. Mr. Monaco served as Head of ISE ETF Ventures at the International Securities Exchange and has a proven track record of bringing new products from concept to commercial launch in his 14 years at ISE. He oversaw all ETP financing activity and ETP-related investments, derivative product development, product partnerships, index development, and index licensing. Mr. Monaco was also responsible for negotiating, structuring, and syndicating all ETP deals. Mr. Monaco has conceived or designed dozens of indexes and has managed the development of many more, most of Previously Mr. Carter was the Founder & CEO of Active Index Advisors acquired by Natixis in 2005 and the Founder & CEO of einvesting acquired by ETRADE in Mr. Carter received a degree in Economics from the University of Arizona in 1991 and began his career in 1992 with Robertson Stephens & Company. which have been the basis for ETFs, ETNs, UITs, mutual funds, or cashsettled derivatives. He has been involved in the formation, launch, marketing, and distribution of many investment products, and is deeply familiar with product structure, contractual agreements, regulatory requirements, exchange rules, and market microstructure. Mr. Monaco graduated from Baruch s Nash Program with an MBA, and from The Cooper Union with a Master of Engineering degree and a Bachelor of Engineering degree. 20

21 TOROSO ACCOLADES Identified by ETF.com as a Strategist Contributor and listed as an ETF All-Star. Presented at many ETF events and ETF conferences on best practices of building portfolios with ETFs. Developed custom software to provide unique insight on ETF security selection. Conducted over 700 portfolio reviews representing influence on over $300 billion in assets 21

22 TOROSO CONTACT INFORMATION NEW YORK 115 WEST 29TH STREET 8 th FLOOR NEW YORK, NY CHICAGO 5100 N RAVENSWOOD AVE. SUITE 228 CHICAGO, IL TOLL FREE TETF TETF@SEIC.COM 22

23 APPENDIX 23

24 THE TOROSO ETF INDUSTRY INDEX TIER A 50% SUBSTANTIAL PARTICIPATION IN THE ETF INDUSTRY WITH DIRECT FINANCIAL BENEFIT TO SHAREHOLDERS Equally-weighted tier designed to capture companies with the purest connection to the growth of the ETF industry. Tier A will focus on issuers but can include companies form other categories that have substantial revenue from the ETF industry or are an integral part of the ETF ecosystem. COMPANIES INCLUDE : Dominant companies like BlackRock, which oversees close to 40% of all US ETF assets. Pure ETF players such as WisdomTree Investments. Exchanges such as Chicago Board Options Exchange, Inc. NAME TICKER WEIGHT (%) INDEX SUBSECTOR MARKET CAP (MIL) P/E P/B P/S P/C BLACKROCK INC BLK 6.25 SPONSORS 67, CHARLES SCHWAB CORP SCHW 6.25 SPONSORS 53, INVESCO LTD IVZ 6.25 SPONSORS 13, STATE STREET CORP STT 6.25 SPONSORS 34, WISDOMTREE INVESTMENTS INC WETF 6.25 SPONSORS 1, MSCI INC MSCI 6.25 S&P GLOBAL INC SPGI 6.25 INDEX/DATA PROVIDERS INDEX/DATA PROVIDERS 10, , CBOE HOLDINGS INC CBOE 6.25 EXCHANGES 11, SOURCE: MORNINGSTAR DIRECT & BLOOMBERG FOR EST 24

25 THE TOROSO ETF INDUSTRY INDEX TIER B 25% SUBSTANTIAL PARTICIPATION IN THE ETF INDUSTRY WITH INDIRECT FINANCIAL BENEFIT TO SHAREHOLDERS Equally-weighted tier designed to capture companies with the purest connection to the growth of the ETF industry. Equally-weighted tier dedicated to companies that have had a meaningful impact on the industry. Revenue and relevance to shareholders: indirect or muted by other business activities. COMPANIES INCLUDE : KCG holdings is an integral part of the ETF ecosystem as a key lead market maker and liquidity provider. JP Morgan is an example of the muted but meaningful tier B selection. NAME TICKER WEIGHT (%) INDEX SUBSECTOR MARKET CAP (MIL) P/E P/B P/S P/C DST SYSTEMS INC DST 3.57 SPONSORS 3, JPMORGAN CHASE & CO JPM 3.57 SPONSORS 319, SEI INVESTMENTS CO SEIC 3.57 FLOW TRADERS NV FLOW.NA 3.57 VIRTU FINANCIAL INC A VIRT 3.57 SERVICE PROVIDERS LIQUIDITY PROVIDERS LIQUIDITY PROVIDERS 9, , , INTERCONTINENTAL EXCHANGE INC ICE 3.57 EXCHANGES 38, NASDAQ INC NDAQ 3.57 EXCHANGES 12, SOURCE: MORNINGSTAR DIRECT & BLOOMBERG FOR EST 25

26 THE TOROSO ETF INDUSTRY INDEX TIER C 15% MODERATE PARTICIPATION N THE ETF INDUSTRY WITH INDIRECT FINANCIAL BENEFIT TO SHAREHOLDERS Equally-weighted tier ETF revenue and designed to capture relevance to exposure to companies shareholders of these that support or have companies is indirect moderate participation in the ETF industry. COMPANIES INCLUDE : US Bancorp & Bank of New York: these companies support the industry as custodians and fund service companies. Virtus, Northern Trust & Ameriprise: companies that issue/sponsor ETFs but their current impact and market share is moderate NAME TICKER WEIGHT (%) INDEX SUBSECTOR MARKET CAP (MIL) P/E P/B P/S P/C AMERIPRISE FINANCIAL INC AMP 1.67 SPONSOR 20, NORTHERN TRUST CORP NTRS 1.67 SPONSOR 20, VIRTUS INVESTMENT PARTNERS INC VRTS 1.67 SPONSOR GOLDMAN SACHS GROUP INC GS 1.67 SPONSOR 86, BANK OF NEW YORK MELLON CORP BK 1.67 SERVICE 54, US BANCORP USB 1.67 SERVICE 85, FACTSET RESEARCH SYSTEMS INC FDS 1.67 INDEX/DATA 6, LONDON STOCK EXCHANGE GROUP PLC LSE.LN 1.67 EXCHANGE 17, CME GROUP INC CLASS A CME 1.67 EXCHANGE 42, SOURCE: MORNINGSTAR DIRECT & BLOOMBERG FOR EST 26

27 THE TOROSO ETF INDUSTRY INDEX TIER D10% NEW OR MINOR PARTICIPATION IN THE ETF INDUSTRY WITH INDIRECT FINANCIAL BENEFIT TO SHAREHOLDERS Equally-weighted tier to gain exposure to ETF industry new-comers and minor participants. This tier can also capture service, data, exchange, and trading companies that have ETF oriented revenue but have yet to make ETFs a business priority. COMPANIES INCLUDE Eaton Vance Corporation (new-comer that is also an innovator with their NextShares structure) NAME TICKER WEIGHT (%) INDEX SUBSECTOR MARKET CAP (MIL) P/E P/B P/S P/C CITIGROUP INC C 0.53 SERVICE 185, E*TRADE FINANCIAL CORP ETFC 0.53 SERVICE 11, ENVESTNET INC ENV 0.53 SERVICE 1, EATON VANCE CORP EV 0.53 SPONSOR 5, FRANKLIN RESOURCES INC BEN 0.53 SPONSOR 24, JANUS HENDERSON GROUP PLC JHG 0.53 SPONSOR 6, LEGG MASON INC LM 0.53 SPONSOR 3, PRINCIPAL FINANCIAL GROUP INC PFG 0.53 SPONSOR 18, MANULIFE FINANCIAL CORP MFC 0.53 SPONSOR 38, MORGAN STANLEY MS 0.53 SERVICE 83, TD AMERITRADE HOLDING CORP AMTD 0.53 SERVICE 22, LPL FINANCIAL HOLDINGS INC LPLA 0.53 SERVICE 4, INTERACTIVE BROKERS GROUP INC IBKR 0.53 SERVICE 17, MARKETAXESS HOLDINGS INC MKTX 0.53 LIQUIDITY 7, COWEN INC COWN 0.53 LIQUIDITY INVESTMENT TECHNOLOGY GROUP INC ITG 0.53 LIQUIDITY THOMSON REUTERS CORP TRI 0.53 INDEX/DATA 32, MORNINGSTAR INC MORN 0.53 INDEX/DATA 3, DEUTSCHE BOERSE AG DB1.GR 0.53 EXCHANGE 19, SOURCE: MORNINGSTAR DIRECT & BLOOMBERG FOR EST 27

28 DISCLOSURES For Financial Professional Use Only This information provided to the recipient by Toroso Investments, LLC ( Toroso ) is intended for use only by the persons or entity to which it was furnished. This information may not be distributed, reproduced or used without the express consent of Toroso. This material has been prepared by Toroso for informational purposes only. Although much of the data underlying the information presented has been obtained from sources (e.g., Morningstar and Solactive AG) believed to be reliable; the accuracy and completeness of such information cannot be guaranteed. DISCLAIMER This document does not constitute an offer to sell or the solicitation of an offer to buy any security or investment product and should not be construed as such. Any investment strategy that follows the Toroso Industry ETF Index ( TETF.Index ) may not be suitable for all types of clients. All investing involves risk including the possible loss of all amounts invested. Prospective clients should not rely solely on this information in making a decision, but should make an independent review of all available facts and information regarding investments following the TETF.Index, including the economic benefits and risks of pursuing any strategies mentioned. Any investment decision should be based on their individual circumstances. Registration with the SEC does not imply a certain level of skill or training. DISCLOSURES Any investment strategy that follows the TETF.Index may be subject to underlying expenses, which generally include investment management fees paid to the investment adviser, trading and transaction fees and other expenses such as custody and clearing which are incurred in the management of investment portfolios. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS, WHICH MAY VARY. 28