As Venuto describes it, both he and Trias got into the ETF industry from the private equity world. “Over the years we saw that the only access point to the ETF industry’s growth was private,” he says.
Venuto says the duo were driving in a rental car in Florida last year while on an investor road show when Trias turned to him and said, “Mike, why can’t everyone do what we’ve done in the past?” He was referring to his desire to create public access to investing in the ETF industry.
“And I said, ‘Let me think about it,’” Venuto recalls. “Then he said, ‘Why do you think it hasn’t been done?’ And I said, ‘Probably because people don’t think there are enough companies, but they’re not thinking about the ecosystem.’
They set about building an index that incorporates the various companies involved in bringing ETF products to market, but along the way realized they needed assistance from industry veterans so they created an index committee that includes Linda Zhang, founder of Purview Investments; Kris Monaco, founder of Level ETF Ventures; and Kevin Carter, founder of Big Tree Capital.
And they enlisted the services of Exchange Traded Concepts (ETC), a white-label ETF provider with a platform enabling investment managers, financial advisors, foreign managers and others to create their own ETFs.
ETC's model is built around its existing exemptive relief status with the Securities and Exchange Commission to bring ETFs to market.
“We’re using their exemptive relief and their processes and the scale that comes with that,” Venuto says. “We’re providing the index to produce the investment concept. Rather than creating a new ETF company, we decided to work with an established one.”
Venuto sees the target market for the TETF fund as anyone who wants to participate in the anticipated continued growth of the ETF industry.
“We look at this as an access product for people who believe in the global growth trend of ETFs,” he says. “The investment case is this could be part of a tactical position, or it could be a long-term strategic hold for people who are watching mutual fund assets go down as ETF assets go up.”
Of course, there's no guarantee that a fund that tracks the ETF industry will experience the same linear growth that has marked the rise in the number of ETFs and the assets they hold. Even most of the so-called pure play ETF providers have non-ETF operations that can impact their financial performance. That said, an index—with an accompanying fund—that tracks the business side of the ETF space is an interesting premise. The folks at Toroso are excited about fulfilling their mission to provide public access to investing in the ETF industry. We'll see if investors share that excitement.