Q&A with Qontigo on NYSE Active Proxy Structure
July 1, 2021
Pam Vance
Managing Director, Portfolio Construction Products, Qontigo
This week we sit down with Pam Vance at Qontigo to discuss how the NYSE and Qontigo are collaborating to offer active managers a ETF structure that forgoes the need to provide full daily holdings disclosure.
For investment management teams, Qontigo is well known for its suite of Axioma Factor Risk Models, portfolio construction tools, and analytics. For those in product development, or are one or two steps removed, the name may be less familiar. What should asset managers know about the company?
Qontigo was created back in 2019 through the combination of Deutsche Börse's world-class indices (STOXX and DAX) and Axioma’s best-in-class portfolio construction and risk analytics tools. We work closely with our clients to deliver sophisticated and targeted solutions at scale across a range of asset classes and investment objectives. Through our open architecture platform, we also offer a curated selection of sustainability data partners in order to help clients meet the demanding and unique goals within the ESG space. Our industry-leading portfolio construction and risk management tools can inform risk sensitivities and target desired factor and sustainability exposures for optimal impact. Our suite of STOXX and DAX sustainability and thematic indices, such as the ESG-X Benchmarks, provide ETF issuers the premium, liquid indices needed to underlie their ETFs.
Based on the expertise and knowledge of the Qontigo team, the NYSE chose Qontigo to power the NYSE Active Proxy Structure. What is Qontigo’s role in the relationship?
Qontigo created the Proxy Portfolio Solution (PPS) for the NYSE Active Proxy Structure, which integrates two Axioma portfolio construction tools to create the proxy basket. First, the Axioma Portfolio OptimizerTM - a powerful and flexible portfolio construction tool capable of modeling complex portfolio problems – allows the issuer to set parameters to differentiate the proxy from the true portfolio. The parameters can be as simple as excluding certain portfolio holdings from the proxy, or as complicated as using a completely different group of securities to mimic the factor exposures of the true portfolio. Second, the Axioma Equity Factor Risk Models are used to estimate and decompose the tracking error between the proxy and the true portfolio. In general, the objective of the proxy construction optimization is to minimize the tracking error between the proxy and the true portfolio, subject to the constraints the issuer imposes. At the end of the day, PPS allows issuers to create a proxy basket in a highly precise and time-efficient manner.
What are the key questions that an asset manager should consider when evaluating a risk model? How is the Qontigo approach different?
When evaluating risk models, asset managers are looking for accurate and responsive models that align with their investment process, investment scope, and investment horizon. Built using innovative and advanced techniques, Axioma Equity Factor Risk Models deliver risk forecasts that align with a manager’s unique investment needs. Our patented dynamic volatility adjustment feature improves risk model responsiveness during market shifts in volatility. Without our issuer-specific covariance feature, risk for closely-related assets (e.g. ADRs and their parents) would be misestimated. For the NYSE Active Proxy Structure, risk model accuracy and responsiveness improve the proxy baskets created by tightening realized tracking error to the true portfolio and minimizing bid-ask spreads.
To align with investment scope, we offer risk models calibrated for a variety of geographies for managing domestic and international portfolios. Our regional and worldwide models are ready to be activated in PPS once SEC approval is granted for international Semi-Transparent ETFs.
And to align with investment horizon, our models – estimated and updated daily – include different forecast horizons such as short-horizon which is suited for more frequent rebalancing in the proxy basket creation process.
Active ETF Stat Pack
| Firms | |||
| # of Issuers | 116 | ||
| # of New Issuers 2021 | 23 | ||
| Products | Assets | ||
| # of ETFs | 589 | AUM ($B) | $260.44 |
| # of New Launches 2021 | 123 | 3 Yr AUM CAGR | 168% |
| Avg. ER | 0.52% | 5 Yr AUM CAGR | 61% |
| Cash Flow | Trading | ||
| YTD Cash Flow ($B) | $56.80 | YTD ADV (Shares) | 63,093,245 |
| 3 Yr Cash Flow | $153.90 | YTD ADV ($) | $3.93B |
| 5 Yr Cash Flow | $189.60 | YTD Avg. Spread (bps)* | 28.77 |
Source: Factset & NYSE Internal Database and Consolidated Tape
Statistics as of 6/25/2021
*Simple average
Active, Semi-Transparent Update
|
Ticker |
Inception |
Name |
AUM |
YTD Cash Flow |
Avg. Spread (bps) |
ADV (shares) |
Structure |
LMM |
Expense Ratio |
| EQOP | 09/17/2020 | Natixis U.S. Equity Opportunities ETF | $14,111,111 | $ - | 14.69 | 63 | NYSE AMS | Citadel | 0.90% |
| VNSE | 09/17/2020 | Natixis Vaughan Nelson Select ETF | $6,628,968 | ($338,859) | 15.65 | 762 | NYSE AMS | Citadel | 0.90% |
| VNMC | 09/17/2020 | Natixis Vaughan Nelson Mid Cap ETF | $10,892,184 | $1,586,361 | 14.79 | 1,586 | NYSE AMS | Citadel | 0.85% |
| ESGA | 07/15/2020 | American Century Sustainable Equity ETF | $147,152,712 | $20,770,411 | 14.93 | 9,851 | NYSE AMS | Citadel | 0.39% |
| MID | 07/15/2020 | American Century Mid Cap Growth Impact ETF | $17,418,587 | $8,695,818 | 15.42 | 2,246 | NYSE AMS | Citadel | 0.45% |
| FDG | 04/02/2020 | American Century Focused Dynamic Growth ETF | $239,127,000 | $1,257,448 | 11.2 | 30,479 | ActiveShares | Citadel | 0.45% |
| FLV | 04/02/2020 | American Century Focused Large Cap Value ETF | $248,507,395 | $59,327,806 | 14.63 | 10,212 | ActiveShares | Citadel | 0.42% |
| CFCV | 05/28/2020 | ClearBridge Focus Value ETF | $3,999,749 | $352,023 | 15.33 | 724 | ActiveShares | GTS | 0.50% |
| FBCG | 06/04/2020 | Fidelity Blue Chip Growth ETF | $359,268,610 | $130,515,428 | 13.4 | 172,625 | Fidelity Proxy | GTS | 0.59% |
| FBCV | 06/04/2020 | Fidelity Blue Chip Value ETF | $96,418,545 | $44,261,423 | 17.46 | 51,420 | Fidelity Proxy | GTS | 0.59% |
| FMIL | 06/04/2020 | Fidelity New Millennium ETF | $64,294,560 | $35,599,248 | 14.1 | 33,943 | Fidelity Proxy | GTS | 0.59% |
| FGRO | 02/04/2021 | Fidelity Growth Opportunities ETF | $32,191,073 | $28,792,728 | 5.16 | 44,373 | Fidelity Proxy | Citadel | 0.59% |
| FMAG | 02/04/2021 | Fidelity Magellan ETF | $31,355,273 | $27,237,280 | 11.45 | 35,617 | Fidelity Proxy | RBC | 0.59% |
| FPRO | 02/04/2021 | Fidelity Real Estate Investment ETF | $14,773,000 | $11,532,688 | 4.38 | 15,336 | Fidelity Proxy | Citadel | 0.59% |
| FSMO | 02/04/2021 | Fidelity Small/Mid-Cap Opportunities ETF | $24,447,435 | $21,315,508 | 13.58 | 24,365 | Fidelity Proxy | RBC | 0.59% |
| TCHP | 08/05/2020 | T. Rowe Price Blue Chip Growth ETF | $170,961,235 | $93,025,048 | 8.13 | 48,551 | T Rowe Proxy | Virtu | 0.57% |
| TDVG | 08/05/2020 | T. Rowe Price Dividend Growth ETF | $67,646,844 | $25,146,531 | 5.6 | 13,525 | T Rowe Proxy | RBC | 0.50% |
| TEQI | 08/05/2020 | T. Rowe Price Equity Income ETF | $48,371,123 | $20,258,626 | 9.66 | 9,971 | T Rowe Proxy | Virtu | 0.54% |
| TGRW | 08/05/2020 | T. Rowe Price Growth Stock ETF | $40,615,541 | $10,692,005 | 6.58 | 6,890 | T Rowe Proxy | RBC | 0.52% |
| TSPA | 06/08/2021 | T. Rowe Price U.S. Equity Research ETF | $16,028,717 | $876,766 | 8.9 | 3,536 | T Rowe Proxy | - | 0.52% |
| IVDG | 12/22/2020 | Invesco Focused Discovery Growth ETF | $1,373,362 | $120,580 | 16.49 | 1,430 | Invesco Model | Citadel | 0.59% |
| IVSG | 12/22/2020 | Invesco Select Growth ETF | $1,361,214 | $ - | 15.42 | 1,028 | Invesco Model | Citadel | 0.48% |
| IVLC | 12/22/2020 | Invesco US Large Cap Core ESG ETF | $6,667,444 | $5,298,630 | 15.31 | 4,281 | Fidelity Proxy | Citadel | 0.48% |
| IVRA | 12/22/2020 | Invesco Real Assets ESG ETF | $1,837,044 | $433,080 | 51.9 | 2,637 | Fidelity Proxy | Citadel | 0.59% |
| LOPP | 02/01/2021 | Gabelli Love Our Planet & People ETF | $9,913,730 | $6,106,750 | 10.94 | 3,354 | ActiveShares | GTS | 0.90% |
| GGRW | 02/16/2021 | Gabelli Growth Innovators ETF | $3,764,400 | $1,158,250 | 12.67 | 833 | ActiveShares | GTS | 0.90% |
| FRTY | 03/01/2021 | Alger Mid Cap 40 ETF | $26,664,125 | $20,256,125 | 46.25 | 22,278 | ActiveShares | Virtu | 0.60% |
| ATFV | 05/04/2021 | Alger 35 ETF | $11,378,875 | $10,149,625 | 36.39 | 14,978 | ActiveShares | Virtu | 0.55% |
| REIT | 02/26/2021 | ALPS Active REIT ETF | $21,426,957 | $17,006,700 | 15.89 | 11,635 | Blue Tractor | GTS | 0.68% |
| STNC | 03/16/2021 | Stance Equity ESG Large Cap Core ETF | $34,535,160 | $5,393,495 | 16.99 | 4,322 | Blue Tractor | GTS | 0.85% |
| PFUT | 05/26/2021 | Putnam Sustainable Future ETF | $4,732,718 | - | 24.34 | 9,128 | Fidelity Proxy | Virtu | 0.64% |
| PLDR | 05/26/2021 | Putnam Sustainable Leaders ETF | $4,495,295 | - | 12.38 | 9,271 | Fidelity Proxy | RBC | 0.59% |
| PGRO | 05/26/2021 | Putnam Focused Large Cap Growth ETF | $5,331,040 | - | 12.02 | 13,579 | Fidelity Proxy | RBC | 0.55% |
| PVAL | 05/26/2021 | Putnam Focused Large Cap Value ETF | $4,532,477 | - | 23.07 | 9,756 | Fidelity Proxy | Virtu | 0.55% |
| FSST | 6/17/21 | Fidelity Sustainability U.S. Equity ETF | $2,011,900 | - | 9.83 | 12,326 | Fidelity Proxy | RBC | 0.59% |
| FDWM | 6/17/21 | Fidelity Women's Leadership ETF | $2,022,060 | - | 11.36 | 5,023 | Fidelity Proxy | RBC | 0.59% |
| FPFD | 6/17/21 | Fidelity Preferred Securities & Income ETF | $5,012,300 | - | 11.03 | 12,366 | Fidelity Proxy | Jane Street | 0.59% |
|
|
Total/Average |
$1,801,466,525 |
$606,827,519 |
15.6 |
654,298 |
|
|
0.60% |
Source: Factset & NYSE Internal Database and Consolidated Tape
Statistics as of 5/28/2021
*Simple average
June Active ETF Launches
| Ticker | Name | Issuer | Launch Date | Asset Class | AUM |
| JUNZ | TrueShares Structured Outcome (June) ETF | TrueMark Investments | 6/1/21 | Equity | $3,792,540.00 |
| TSPA | T. Rowe Price U.S. Equity Research ETF | T. Rowe Price Group, Inc. | 6/9/21 | Equity | $16,028,716.99 |
| DFAT | Dimensional U.S. Targeted Value ETF | Dimensional Holdings | 6/14/21 | Equity | $5,950,074,140.56 |
| DFAC | Dimensional U.S. Core Equity 2 ETF | Dimensional Holdings | 6/14/21 | Equity | $13,234,297,164.83 |
| DFAS | Dimensional U.S. Small Cap ETF | Dimensional Holdings | 6/14/21 | Equity | $3,991,080,595.77 |
| DFUS | Dimensional U.S. Equity ETF | Dimensional Holdings | 6/14/21 | Equity | $5,543,000,347.68 |
| XPND | First Trust Expanded Technology ETF | First Trust | 6/15/21 | Equity | $2,040,530.81 |
| SHUS | Syntax Stratified U.S. Total Market Hedged ETF | Syntax Advisors | 6/16/21 | Equity | $43,945,000.00 |
| CUBS | Asian Growth Cubs ETF | Exchange Traded Concepts | 6/17/21 | Equity | $2,284,920.00 |
| FSST | Fidelity Sustainability U.S. Equity ETF | Fidelity | 6/17/21 | Equity | $2,011,900.00 |
| FDWM | Fidelity Women's Leadership ETF | Fidelity | 6/17/21 | Equity | $2,022,060.00 |
| FPFD | Fidelity Preferred Securities & Income ETF | Fidelity | 6/17/21 | Fixed Income | $5,012,300.00 |
| JRE | Janus Henderson U.S. Real Estate ETF | Janus Henderson | 6/23/21 | Equity | $10,074,240.00 |
| SPAX | Robinson Alternative Yield Pre-merger SPAC ETF | Toroso Investments | 6/23/21 | Equity | $1,502,250.00 |
| QJUN | FT Cboe Vest Growth-100 Buffer ETF - June | First Trust | 6/21/21 | Equity | $11,111,140.40 |
| YJUN | FT Cboe Vest International Equity Buffer ETF - June | First Trust | 6/21/21 | Equity | $2,028,040.56 |
| Total | 16 New Funds | $28,820,305,887.61 |
Source: Factset as of 6/25/2021
NYSE ETF Summit & Active ETF Webinar Series Replay
Missed the April NYSE ETF Summit or our Active ETF Webinar series? Access replays from the Summit here or visit HomeofETFs.com to catch up.
Hear from ETF experts representing the various active ETF structures, fund sponsors such as American Century, Fidelity, PIMCO and T. Rowe Price, liquidity providers such as Flow Traders and Jane Street, and service providers such as BNY Mellon and State Street.