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Q&A with IndexIQ

August 11, 2022
Jonathan Spiegel

Head of ETF Product Development, IndexIQ

This week we sit down with Jonathan Spiegel at IndexIQ to discuss their recent launch leveraging the NYSE Active Proxy Structure and how the active ETF market is evolving.

IndexIQ has a long-standing track record as an ETF issuer and innovator, launching its first NYSE listed ETFs over a decade ago and being among the first issuers to launch liquid alternatives in ETFs. What led to the decision to expand the actively managed ETF lineup beyond fixed income and into equities with the launch of IWFG and IWLG in 2022?

It’s no surprise that actively managed ETFs have been gaining momentum for some time, with active management growing considerably over the past 5 years. While these ETFs are only a small piece of the overall pie, it’s hard to ignore this trend in terms of the number of strategies launching, as well as assets raised, and investor interest.

We noticed this trend several years ago, and as part of the New York Life Investments multi-boutique structure, we’ve also been able to leverage the expertise of the active managers within the NYLI family. Active management has been one of IndexIQ’s key focus areas for some time, and we’ve launched a number of actively managed fixed income strategies over the past few years. In fact, as we think more wholistically about our ETF product offerings, we group them into four key categories: 1) IQ Beyond Beta ETFs, 2) IQ Alternatives, 3) IQ Active ETFs, and 4) IQ Dual Impact ETFs.

Equities was one area where we saw an opportunity to build out our active ETF suite. We leveraged our existing relationship with Winslow Capital Management (Winslow Capital) to take a strategic next step and launch the new IQ Winslow ETFs: the IQ Winslow Large Cap Growth ETF (IWLG) and IQ Winslow Focused Large Cap Growth ETF (IWFG).

IndexIQ decided to license the NYSE Active Proxy Structure to give your investment management teams protection and disclosure flexibility inside the ETF wrapper. What were the key considerations for selecting the structure as well as the ETFs that leverage it?

Prior to the launch of IWLG and the IWFG, we were monitoring the trends within the actively managed semi-transparent arena for a while. Working with Winslow Capital to develop these two strategies was a natural extension of our existing relationship with the Firm through our parent company, New York Life Investment Management (“NYLIM”).

The NYSE Active Proxy Structure has garnered a lot of interest, as seen by the number of ETFs launching since 2020 when the first semi-transparent ETF launched. Given the market for these ETFs is still in a relatively nascent stage, it’s clear that asset managers recognize the potential of this structure. The NYSE Active Proxy Structure gives investors access to IndexIQ and Winslow’s Large Cap Growth strategy in an ETF format, which is currently only offered by NYLIM in a mutual fund and CIT structure. The NYSE Active Proxy Structure allows us to maintain consistency with the holdings disclosure approach taken by the mutual fund and take advantage of the benefits that the ETF structure is able to offer, such as tax efficiencies and intra-day liquidity.

As a global asset manager, what benefits and/or nuances come with operating an active ETF product line-up compared to other investment wrappers (i.e., Mutual Funds, CITs, etc.)?

As a global asset manager, NYLIM offers numerous strategies across many different product wrappers, including ETFs, mutual funds, CITs, SMAs, etc. One of the largest benefits is our ability to export successful strategies and leverage existing relationships with different subadvisors onto the IndexIQ platform. We are talking about IWLG and IWFG right now, but we can access the full breadth and depth of NYLIM as a global asset manager, as we contemplate the future expansion of our ETF offerings.

What are the key considerations that investors should contemplate when considering actively managed ETFs?

There are a number of reasons we believe active management adds value. At the heart of it, active management provides investors an opportunity to outperform a benchmark. One of the biggest considerations should be the investment advisor / subadvisor and their track record. We also believe in the value of passive management, as you can see with the majority of our ETF offerings. However, active management provides investment managers the flexibility to adjust their approach when things may or may not be working. Part of this flexibility is driven by a risk management framework that comes with the active investment approach. Another benefit of active management is the ability to allocate more funds towards higher conviction investments. Unlike a traditional market-cap weighted passively managed ETF, actively managed ETFs can choose how much to invest in a particular company. And let’s not forget this is all done within the ETF structure, which can provide tax-efficiency and intra-day liquidity, to name a few of the benefits.

Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?

To expand product offerings into actively managed ETFs, it’s important to have the proper infrastructure and ability to execute. Active management is becoming more prevalent within the ETF landscape, although still on a small scale compared to passively managed ETFs. It is important to have a value proposition with the strategy you plan to roll out given the level of competition. It’s equally as important to have a good relationship with your service providers. For example, we have worked with the New York Stock Exchange (NYSE) on the launch of many of our ETFs. NYSE has provided us with support, advice, and market intelligence on how best to think about strategies we consider launching.

Whether active or passive, IndexIQ’s main priority has been to offer thoughtful investment solutions to the marketplace, and we look forward to continuing to bring out innovative and impactful strategies as we look to help our clients meet their portfolio’s needs.

Active ETF Stat Pack

# of Issuers185
# of New Issuers 202233
# of ETFs869AUM ($B)$364.74
# of New Launches 20221333 Yr AUM CAGR165%
Avg. ER0.41%5 Yr AUM CAGR59%
Cash FlowTrading
YTD Cash Flow ($B)$48.80YTD ADV (Shares)127,271,300
3 Yr Cash Flow$231.40YTD ADV ($)$5.10 B
5 Yr Cash Flow$262.20YTD Avg. Spread (bps)*32.93

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 2/14/2022

*Simple average

Active, Semi-Transparent Update

TickerInceptionNameAUMYTD Flows30 Day Median Spread (bps)ADV (shares)StructureLMMExpense Ratio
Listing Venue 
EQOP9/17/20Natixis U.S. Equity Opportunities ETF$8,886,352$623,98711.41870NYSE AMSCitadel0.85%NYSE
VNSE9/17/20Natixis Vaughan Nelson Select ETF$10,440,662$6,230,4448.132,135NYSE AMSCitadel0.80%NYSE
VNMC9/17/20Natixis Vaughan Nelson Mid Cap ETF$7,540,403$(288,632)14.43475NYSE AMSCitadel0.85%NYSE
ESGA7/15/20American Century Sustainable Equity ETF$109,330,888$(30,574,911)12.0814,929NYSE AMSCitadel0.39%NYSE
MID7/15/20American Century Mid Cap Growth Impact ETF$25,961,376
$ 4,995,239
10.14,452NYSE AMSCitadel0.45%NYSE
ESGY7/1/21American Century Sustainable Growth ETF$7,048,829$1,144,3285.89463NYSE AMSCitadel0.39%NYSE
NDVG8/5/21Nuveen Dividend Growth ETF$6,982,136$991,5857.593,368NYSE AMSCitadel0.64%NYSE
NSCS8/5/21Nuveen Small Cap Select ETF$5,655,208$6,08410.91356NYSE AMSCitadel0.85%NYSE
NWLG8/5/21Nuveen Winslow Large-Cap Growth ESG ETF$5,074,650$220,9547.994,791NYSE AMSCitadel0.64%NYSE
NUGO9/28/21Nuveen Growth Opportunities ETF$2,529,567,758$(34,482,373)6.97210,739NYSE AMSCitadel0.55%NYSE
SAEF11/16/21Schwab Ariel ESG ETF$10,967,250
$ 4,753,150
27.344,013NYSE AMSFlow Traders0.59%NYSE
IWLG6/23/22IQ Winslow Large Cap Growth ETF$5,859,966$ -21.5111,322NYSE AMSCitadel0.60%NYSE
IWFG6/23/22IQ Winslow Focused Large Cap Growth ETF$5,867,400$775,39021.549,165NYSE AMSCitadel0.65%NYSE
FDG4/2/20American Century Focused Dynamic Growth ETF$142,985,768$(17,859,205)10.4426,420ActiveSharesCitadel0.45%Cboe BZX
FLV4/2/20American Century Focused Large Cap Value ETF$218,357,094$(8,099,752)10.298,787ActiveSharesCitadel0.42%Cboe BZX
CFCV5/28/20ClearBridge Focus Value ETF$3,554,318$339,74631.94222ActiveSharesGTS0.50%Cboe BZX
FBCG6/4/20Fidelity Blue Chip Growth ETF$382,070,325$745,14023.56135,924Fidelity ProxyGTS0.59%Cboe BZX
FBCV6/4/20Fidelity Blue Chip Value ETF$113,096,655
$         15,081,145
32.6727,236Fidelity ProxyGTS0.59%Cboe BZX
FMIL6/4/20Fidelity New Millennium ETF$55,228,680$(4,169,738)36.110,305Fidelity ProxyGTS0.59%Cboe BZX
FGRO2/4/21Fidelity Growth Opportunities ETF$64,792,825
$         23,032,358
13.26171,773Fidelity ProxyCitadel0.59%Cboe BZX
FMAG2/4/21Fidelity Magellan ETF$47,686,950$705,18811.9917,683Fidelity ProxyRBC0.59%Cboe BZX
FPRO2/4/21Fidelity Real Estate Investment ETF$19,920,515$226,8388.826,451Fidelity ProxyCitadel0.59%Cboe BZX
FSMO2/4/21Fidelity Small/Mid-Cap Opportunities ETF$27,469,503$(113,630)12.627,406Fidelity ProxyRBC0.59%Cboe BZX
FSST6/17/21Fidelity Sustainability U.S. Equity ETF$5,764,440$482,08510.021,127Fidelity ProxyRBC0.59%NYSE
FDWM6/17/21Fidelity Women's Leadership ETF$2,641,755$23511.98658Fidelity ProxyRBC0.59%NYSE
TCHP8/5/20T. Rowe Price Blue Chip Growth ETF$263,035,063$62,391,27613.69137,723T Rowe ProxyVirtu0.57%NYSE
TDVG8/5/20T. Rowe Price Dividend Growth ETF$154,972,940
10.7826,432T Rowe ProxyRBC0.50%NYSE
TEQI8/5/20T. Rowe Price Equity Income ETF$93,009,039
12.7118,028T Rowe ProxyVirtu0.54%NYSE
TGRW8/5/20T. Rowe Price Growth Stock ETF$45,400,531
11.6315,009T Rowe ProxyRBC0.52%NYSE
TSPA6/8/21T. Rowe Price U.S. Equity Research ETF$22,000,721
$ 1,759,097
10.692,059T Rowe ProxyRBC0.52%NYSE
IVDG12/22/20Invesco Focused Discovery Growth ETF$636,971
$   (310,730)
10.69371Invesco ModelCitadel0.59%Cboe BZX
IVSG12/22/20Invesco Select Growth ETF$1,100,111
9.78375Invesco ModelCitadel0.48%Cboe BZX
IVLC12/22/20Invesco US Large Cap Core ESG ETF$6,238,093
16.42,003Fidelity ProxyCitadel0.48%Cboe BZX
IVRA12/22/20Invesco Real Assets ESG ETF$3,303,274
$ 1,085,240
30.151,695Fidelity ProxyCitadel0.59%Cboe BZX
Gabelli Love Our Planet & People ETF
$ 3,319,190
GGRW2/16/21Gabelli Growth Innovators ETF$2,900,050
$          -  
GAST1/5/22Gabelli Asset ETF$4,515,210$244,38051.98120ActiveSharesGTS0.90%NYSE
FRTY3/1/21Alger Mid Cap 40 ETF$33,226,250
ATFV5/4/21Alger 35 ETF$10,513,875
REIT2/26/21ALPS Active REIT ETF$19,218,355$(4,738,000)45.696,123Blue TractorGTS0.68%NASDAQ
STNC3/16/21Stance Equity ESG Large Cap Core ETF$42,739,455
42.452,593Blue TractorGTS0.85%NYSE
PFUT5/26/21Putnam Sustainable Future ETF$7,193,387$545,43634.951,848Fidelity ProxyVirtu0.64%NYSE
PLDR5/26/21Putnam Sustainable Leaders ETF$6,329,676
11.21202Fidelity ProxyRBC0.59%NYSE
PGRO5/26/21Putnam Focused Large Cap Growth ETF$10,672,061
8.922,142Fidelity ProxyRBC0.55%NYSE
PVAL5/26/21Putnam Focused Large Cap Value ETF$34,463,717
30.529,799Fidelity ProxyVirtu0.55%NYSE
HFGO11/9/21Hartford Large Cap Growth ETF$80,705,185
30.64166,719Fidelity ProxyCitadel0.59%Cboe BZX
SEMI3/30/22Columbia Seligman Semiconductor and Technology ETF$14,665,717
30.6613,809Fidelity ProxyVirtu0.75%NYSE
CAPE4/5/22DoubleLine Shiller CAPE U.S. Equities ETF$61,426,500
GABF5/11/22Gabelli Financial Services Opportunities ETF$5,462,520$261,40038.77306ActiveSharesGTS0.00%NYSE
BYRE5/19/22Principal Real Estate Active Opportunities ETF$5,758,504
14.73,710Fidelity ProxyVirtu0.65%NYSE

Source: FactSet & NYSE Internal Database and Consolidated Tape Statistics as of 8/5/2022

*Simple average

July & August MTD Active ETF Launches

TickerNameIssuerLaunch DateAsset ClassAUM
SSXUDay Hagan/Ned Davis Research Smart Sector International ETFDay Hagan Asset Management07/01/2022Equity$7,627,380
IRHGGlobal X Interest Rate Hedge ETFGlobal X07/06/2022Alternatives$3,126,293
Global X Interest Rate Volatility & Inflation Hedge ETF
Global X07/06/2022Fixed Income$3,213,852
SPCZRiverNorth Enhanced Pre-Merger SPAC ETFTrueMark Group07/12/2022Equity$3,761,790
MCHMatthews China Active ETFMatthews International Capital Management07/14/2022Equity$1,430,328
MINVMatthews Asia Innovators Active ETFMatthews International Capital Management07/14/2022Equity$1,254,780
MEMMatthews Emerging Markets Equity Active ETFMatthews International Capital Management07/14/2022Equity$1,594,794
TSLQAXS TSLA Bear Daily ETFAXS Investments07/14/2022Equity$40,497,750
NVDSAXS 1.25X NVDA Bear Daily ETFAXS Investments07/14/2022Equity$1,987,060
PFESAXS 2X PFE Bear Daily ETFAXS Investments07/14/2022Equity$2,364,445
PFELAXS 2X PFE Bull Daily ETFAXS Investments07/14/2022Equity$1,516,255
PYPSAXS 1.5X PYPL Bear Daily ETFAXS Investments07/14/2022Equity$1,434,440
PYPTAXS 1.5X PYPL Bull Daily ETFAXS Investments07/14/2022Equity$2,386,405
NKEQAXS 2X NKE Bear Daily ETFAXS Investments07/14/2022Equity$1,932,970
NKELAXS 2X NKE Bull Daily ETFAXS Investments07/14/2022Equity$1,759,815
SIOTouchstone Strategic Income Opportunities ETFTouchstone07/25/2022Fixed Income$82,502,918
MMSBIQ MacKay Multi-Sector Income ETFNew York Life07/26/2022Fixed Income$25,410,000
TSLHInnovator Hedged TSLA Strategy ETFInnovator07/26/2022Equity$2,558,000
LCFTouchstone US Large Cap Focused ETFTouchstone07/29/2022Equity$1,000,000
CGVConductor Global Equity Value ETFIronHorse Holdings08/01/2022Equity$63,575,171
BCDFHorizon Kinetics Blockchain Development ETFHorizon Kinetics LLC08/02/2022Equity$1,301,330
DVNDTouchstone Dividend Select ETFTouchstone08/04/2022Equity$5,040,000
STCESchwab Crypto Thematic ETFCharles Schwab08/04/2022Equity$5,248,026
Total - 23 New ETFs$262,523,802

Source: Factset as of 8/11/2022

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