Stuart Forbes, co-founder of Rize ETF, has said AssetCo’s acquisition of the thematic ETF issuer will give them what they need to take the firm to the “next level”.
Last week, AssetCo – the firm chaired by Martin Gilbert – purchased a 63% stake in Rize ETF for £16.5m and committed a further £5.25m to help the ETF issuer’s growth.
The original investors in Rize ETF were Davy – which AssetCo has purchased its stake from – Deloitte, Société Générale and index provider Foxberry.
Speaking to ETF Stream, Forbes revealed Rize ETF were speaking to a number of different parties since launching in late 2019 but AssetCo’s involvement was a big opportunity due to the experience within their team.
“What we liked about the deal is we are not partnering with another asset manager so there is no conflict [of interest],” he said.
“This is a fantastic opportunity for Rize ETF to leverage their own successes and experiences in the past of building a global asset manager.”
Forbes stressed the deal would “turbocharge” the business by allowing the firm to invest in the product development process as well as sales and marketing.
“Where we might have only launched two ETFs, we will launch four,” he continued. “We have tons of ideas but they all cost money.
“There will be no change in the way the business is managed. AssetCo has bought into our vision for the business and the founders will continue to lead.”
Thematic ETF liquidity
Looking at the wider thematic ETF landscape in Europe, liquidity has been a key focus for investors this year. This came after a wave of inflows into two BlackRock clean energy ETFs in 2020 artificially drove up the prices of the underlying holdings causing S&P Dow Jones Indices (SPDJI) to rebalance the index in April following a consultation with the market.
In what has been described as a “debacle” by some corners of the ETF industry, the spotlight has been on issuers to ensure their strategies are not caught on the wrong side of a liquidity crunch, especially when exposed to small cap stocks.
Forbes stressed one key differentiator is the firm designs its own indices instead of selecting an already-created strategy from an index provider.
“If you license an off-the-shelf index then you have no control how an index provider incorporates liquidity considerations into the construction of that index.
“As we have seen with clean energy this year, some ETFs that did not incorporate sufficient liquidity features into the indices from the outset and that has bitten them hard as the assets have accumulated.
“We apply a range of liquidity filters and review them with the index provider. There are a number of mechanisms to improve liquidity such as stock weightings, the minimum thresholds applied to individual stocks and the use of weighting caps to limit exposure to less liquid names.”