At Brown Brothers Harriman (BBH), a consultative approach to servicing and providing market leading technology solutions to ETF sponsors is central to the Firm’s success. As of year-end 2013, BBH is the third largest US ETF service provider with USD210bn in assets under custody. BBH has launched over 170 ETFs with 20 different ETF sponsors, including prominent names such as Vanguard, PIMCO and Invesco PowerShares.
“Our consultative approach to helping firms enter the ETF space and advising on ideas and industry trends resonates well with the marketplace. Our ability to deliver creative solutions to manage market complexities for our clients is an important aspect of our work,” explains Shawn McNinch (pictured), Global Head of ETF Services at BBH.
An innovative client that was added to the BBH roster last year was KraneShares, an asset manager that focuses on creating US-listed ETFs for investment into China. “We are working with them on RQFII [renminbi qualified foreign institutional investor] solutions that give investors access to China A-shares. We are currently working with two other ETF sponsors to launch similar RQFII products; it’s certainly an area of growth.”
Working in the RQFII segment brings certain challenges to administrators, but McNinch says that for BBH it has been more a case of adjusting its global service model.
“With ETFs that are trading China A-shares, you must ensure that the RQFII quota target is not exceeded. We achieve this by putting controls in place with the ETF manager. In addition, we have to make sure the creation process works accordingly with time zone differences.”
Another growth area for BBH is the rising prominence of actively managed ETFs: “Large mutual fund managers have made inroads into the active ETF space. From an administrator’s perspective, it’s how we inform our clients on the merits of the ETF structure and help them think about augmenting their existing operating models to support ETFs. Also, it’s about helping managers to think through their distribution strategy for an active ETF versus a traditional mutual fund, which we can help with,” says McNinch.
Technology is integral to the BBH offering. BBH has its own authorised participant (AP) servicing desk that is wholly dedicated to supporting clients’ relationships with APs. “We work with the APs to address questions such as settlement practices in different markets for the underlying basket securities. We’ve also built our order taking capability – we receive creation and redemption orders from APs. This is done either by calling it in to our AP servicing desk or via AP EXchange™ (APEX), our AP web platform that was launched last year,” says McNinch.
“Within our ETF technology suite, we have the ETF Connect® platform, which is a central gateway for reporting, information, and tools for our ETF relationships. The tool gives clients real-time access to information including the settlement status of creation/redemption trades. Moreover, last year we rolled out our ETF STAR Platform, which handles all aspects of ETF accounting and Portfolio Composition File (PCF) (basket and cash) generation process,” adds McNinch.
On winning the award, McNinch comments: “We are fortunate to work with leading ETF sponsors globally and pleased that the industry has recognised BBH as a market leader for its consultative approach, leading ETF-specific technology and consistent high levels of service.”
