The Pension Application

This Application of the GFX Global Hub and Spoke^SM System permits a pension fund or other tax-exempt investor to combine the gross dividend tax treatment and investment flexibility of a separate managed account (SMA) or pooled account with the lower expenses and reduced tracking error or greater diversification of the larger portfolio of an ETF or investment fund.

The GFX Global Hub and Spoke^SM System is the first that permits an investment management firm to operate a single GFX Portfolio with pension fund assets and assets from investment funds and/or ETFs sold publicly in the U.S. (mutual funds), Europe (UCITS) and Asia. Other SMAs for private clients, pooled private accounts, and banking, insurance, and other collective investment products are also able to invest through that same GFX Portfolio.

The GFX Global Hub and Spoke^SM System results in:

• The most 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 investment products, and across borders for the same active or passive index investment strategy,
• The most efficient tax treatment so that SMAs and pooled accounts would receive gross dividends if they qualified to receive them directly and would be subject to minimal, if any, security transfer taxes and stamp duty,
• The minimal level of expenses for each participating SMA or pooled account linked solely to the services provided through a GFX Portfolio and independent of additional expenses incurred directly by any other participating ETF or investment fund,
• The most effective new market entry through the critical mass and performance track record for new investment funds and/or ETFs with the domicile and other components selected independently from other participating funds 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 investment management firm and its distribution partners through the creation of new participating funds sponsored by the distributor with the performance track record and critical mass of the other participating funds,
• The maximum investment flexibility through the ability to change, expand or modify the active or passive index investment strategy of a GFX Portfolio through the holding of additional assets or by entering into derivative contracts at the SMA or pooled account level, or by investing a portion of its assets through another GFX Portfolio, and
• Maximum liquidity through the ability at any time to withdraw all or a portion of its assets by withdrawing specific securities from the GFX Portfolio or to convert a portion of its interest in the GFX Portfolio into shares of a participating ETF and selling those shares on an exchange.

This Application is thus the next generation solution for pension funds and other tax-exempt investors to achieve the greatest efficiency from investment, expense control and fiscal perspectives, and for investment management firms to efficiently operate multiple SMAs, ETFs, and investment funds; effectively expand across borders and national market segments; create and operate enhanced sub-advisory/private label funds for their distribution partners; and employ sophisticated portfolio management techniques to customize a portfolio’s investment strategy for a specific national market or market segment.

Contractual Separation of Portfolio Components 

The GFX Global Hub and Spoke^SM System involves the contractual separation of the portfolio components of the SMA, pooled account, ETF, or investment fund from the distribution, administration and shareholder recordkeeping components.  Once separated, other existing or new SMAs, pooled accounts, ETFs, or investment funds can likewise separate their distribution, administration and shareholder recordkeeping components and invest through that same investment portfolio.  This single investment portfolio is referred to as a GFX Portfolio and each of the SMAs, pooled accounts, ETFs, and investment funds investing through it is referred to as a participating SMA, pooled account, ETF, or investment fund, or collectively as participating investment products.