ETFs
The ETF Application
The ETF Application of the GFX Global Hub and SpokeSM System is the next generation solution for ETF sponsors to efficiently operate multiple ETFs with the same investment objective and policies; effectively expand across borders and national market segments; create and operate sub-advisory ETFs for their distribution partners; and employ sophisticated portfolio management techniques to adjust a portfolio’s investment strategy for a specific national market or market segment.
The GFX Global Hub and SpokeSM System is the first that permits an asset management organization to operate a single portfolio with assets from ETFs sold publicly in the U.S. (’40 Act ETFs), Europe (UCITS) and Asia. This System is used for index-based and actively-managed ETFs as well as other exchange traded investment products, including closed-end investment companies and investment trusts.
The GFX Global Hub and SpokeSM System thus results in:
- Efficient and cost effective portfolio operations through a single investment manager, a single safekeeper, a single auditor, single gross investment performance, and a single portfolio compliance platform across fund ranges and across borders for the same investment objective,
- A single, continuous 24-hour global trading market for investors in and market makers for participating ETFs, regardless of their domicile or the exchanges on which their shares are listed, from the opening of the exchanges on the Pacific Rim on a Monday morning until the close of the New York exchanges on a Friday night,
- Enhanced liquidity and tighter spreads for shares of each participating ETF through the ability to convert those shares into shares of each other participating ETF,
- Effective new market entry through the critical mass, performance track record and enhanced liquidity and tighter spreads for new ETFs with the domicile and other components selected independently from other participating ETFs in accordance with the applicable legal/fiscal requirements and market conventions of their intended market segment,
- Efficient and cost effective sub-advisory/private label arrangements between the ETF sponsor and its distribution partners through the creation of new participating ETFs sponsored by the distributor, and
- Customized investment policies through the ability to change, expand or modify the investment strategy of a portfolio for each national market or market segment.
The principals of GFX have developed and operated many innovative fund structures over the past several decades, including the hub and spoke structure. The staff of the U.S. Securities and Exchange Commission reviewed that structure and concluded that “the organization of mutual funds in hub-and-spoke arrangements is an important evolution in the mutual fund industry.”
These development efforts have continued to evolve so that currently GFX is licensing the know-how and software necessary to implement and support the ETF Application of its GFX Global Hub and SpokeSM System.
U.S., Europe or Asia
The GFX Global Hub and SpokeSM System is used by two or more index-based or actively-managed ETFs, or other exchange traded investment products, including closed-end investment funds and investment trusts, to invest through a single GFX Portfolio. These ETFs could be U.S., European or Asian.
The GFX Global Hub and SpokeSM System involves the separation of the portfolio components of the ETF from the administration and distribution components. Once separated, other existing or new ETFs can likewise separate their investment components and invest through that same investment portfolio. This single investment portfolio is referred to as a GFX Portfolio and each of the ETFs investing through it are referred to as a participating ETF.
As the portfolio components of an existing traditional ETF are separated from the other components to become a GFX Portfolio, that portfolio retains its performance track record, adjusted for expenses. Thus, in turn, a newly-created participating ETF has that same track record at the time of its organization, adjusted for expenses.