ETF industry giant BNY Mellon has finally taken the final step in its provision of facilities across the ETF eco-system with the launch of its first ETFs.
The first three Morningstar-benchmarked equity ETFs (BNY Mellon US Large Cap Core Equity ETF; BNY Mellon US Mid Cap Core Equity ETF; BNY Mellon US Small Cap Core Equity ETF) launched on the NYSE last week.
Stephanie Pierce, Chief Executive Officer of ETF and Index for BNY Mellon Investment Management says: “The first and most important thing for us is that the launch of our first ETFs was more focused on meeting the needs of our clients and deepening our relationships.”
For BNY Mellon, the initial three core building block ETFs offer another access point for the capabilities in fund administration, custody and broking in the ETF industry that they are best known for.
While these ETFs are the first, BNY Mellon Investment Management has been acting as a sub-adviser in ETFs for institutions, with USD44 billion under management, plus USD340 billion in assets in indexing, in their role as the seventh largest indexer globally.
“We aren’t new to this business,” Pierce says. “We are in a unique position in that we have been in the ETF business on behalf of someone else’s brand for at least a decade as a sub adviser.”
The in-house expertise means that the firm can price its new ETFs competitively, Pierce says, and two of the ETFs, the BNY Mellon US Large Cap Core Equity ETF and BNY Mellon Core Bond ETF will be zero-fee ETFs, described by the firm as the ETFs in the largest equity and fixed income US market categories offered to investors without fee waivers or other restrictions.
“These will be of great value to the clients we work with in other areas,” Pierce says. “We believe that clients deserve an institutional quality choice in a concentrated market place and we want to give them a choice with a brand they trust.”
Strategically, Pierce says that BNY Mellon couldn’t help but observe that ETFs are one of the fastest growing areas in the financial services industry. “We like to think of ourselves as solution providers – a one stop shopping experience for clients who want to do anything in ETFs and this is the last piece in the chain, making our leading capabilities available for clients who are using more and more passives and ETFs.”
While these are US-listed vehicles, the plan is to expand on global lines. “We are not in a rush as each region is a little different in how clients think about ETFs and it’s important for us to understand client needs and where they might evolve.”
There are many comments on zero fee ETFs, with many saying there is no such thing as a free lunch, but Pierce says: “These are truly zero fee ETFs, truly free to our clients, and if this is the way we can bring greater value to our clients it will deepen our relationships with them, bringing our scale and efficiency and it is the right thing to do.”
Free ETFs support added value and enables clients to realise their goals more efficiently, compounding investment returns, she says. “We like to make sure we are playing a role in that there is nothing gimmicky here just our relationships with clients and passing along saving and value to them.”
The next five new ETFs will be listed over coming weeks, leaving BNY Mellon Investment Management with eight ETFs, and after that, look at BNY Mellon’s internal asset management capabilities across its eight different multi-specialist firms, which manage USD1.8 trillion, to see what might come next onto the ETF launch pad.
“You’ll get a pretty good sense of what we are thinking about,” Pierce hints.