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Truss Edge offers end to end solution for new ETF providers

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Offering front to back real time support for European ETFs, including the range set up by LGIM, is keeping Truss Edge’s chief strategy officer Dave Shastri very busy.

The fintech firm was founded in the multi strategy hedge fund space in 1999, and now offers technological support to a range of hedge funds, CTAs and ETFs. It has been working with ETFs for the last 10 years.
 

Shastri, an 18-year veteran of the Bank of Bermuda, says: “We have had lots of launches with existing clients and the challenge has been in finding new firms who are setting up ETFs in the UK and on the Continent.”

His experience has been that there are two stages for existing fund management firms that are considering entering the ETF industry to go through.

 
“Firstly, they ask, ‘do we even want to do an ETF?’” Shastri says. “Most of the firms we speak to already have a passive investment business but the desire for an ETF has to work with what they are already doing, as it is not the same as an existing passive programme and they have to go through quite a lot of internal review on that point.”
 
The launches Truss Edge has been involved with over the past year are mostly in the thematic ETF sector, whereas in the past, they worked mostly with core investment structures.
 
“Thematic makes more sense with the kind of business that ETFs are involved in within Europe. It’s much more of an asset allocation role here. Maybe as we get more of the retail side coming in it will change,” he says, commenting that thematic ETFs have a different cost structure, are generally more expensive to run and more involved.
 
The next question fund management firms ask themselves, before leaping into an ETF launch, is whether their existing technology, processing and operations will work with a new business line.
 
“What I find is that these are firms with large footprints and existing technology and they want to know whether an ETF business can be run cost effectively within their firms. We are a true end to end solution in that regard,” Shastri says.
 
He finds that within Europe fund managers are considering outsourcing the trading side of running an ETF which means that the goal posts have moved on the end to end solution. Outsourcing trading also means outsourcing the relationship with market makers and authorised participants.
 
“We are operationally delivering part of the lifecycle, but not that part of it,” Shastri says. “That is where the market in Europe is different.”
 
Having supported ETFs for 10 years, Truss Edge has developed a lot of technology and Shastri reports that a lot of suppliers, vendors and consultants say good things about their system.
 
“They evaluate us on factual merits, on what we cover, and because we cover the whole lifecycle within one dedicated structure, we are completely unique and fundamentally it is cheaper.
 
“Having strong technology supporting whatever part of the investment business you are in is important, because investment management is a numbers business, we should be expecting more from automation.
 
“If you take care of the dollars and cents on the cost side you can make a business viable,” Shastri says. “In the ETF space, we are looking for fund managers who don’t have an ETF and who want a clean slate to give them an opportunity to put in place an efficient structure.”
 

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