NYSE-Powered ETF Leaders: US Bank’s Michael Barolsky
In April, US Bank was a year away from converting its first mutual fund to an exchange-traded fund. From what senior vice president Michael Barolsky has seen, “advisor interest” in converting mutual funds to ETFs “is only accelerating.”
“In recent months, we’ve already converted five additional mutual funds to ETFs, and we’ve seen interest from a wide range of advisors for a variety of reasons,” Barolsky told NYSE’s Judy Shaw for “ETF Leaders, Powered by the New York Stock Exchange” at Exchange: An ETF Experience 2022.
These conversions aren’t just for typical equity funds. In March, US Bank was “making conversions for long-short strategies and option-based funds,” according to Barolsky. “So that really covers a very wide range of reasons why advisors want to make these conversions.”
Advisors are seeking these conversions because they want the tax efficiency that ETFs provide, they want lower costs, and they want “the distribution opportunities available to ETFs that they don’t find in the mutual fund space of placement “.
Barolsky added that US Bank has “several other such [conversions] planned with [its] customers later this year, so there will be a lot more to come.
Using the Multi-Series Trust
Barolsky has seen a growing trend for advisors of all shapes and sizes to use a multi-series trust structure to enter the ETF market, since the structure is “designed to lower barriers to entry”.
With an MST, a new issuer can “bring a product to market while already being surrounded by professionals who know the ETF space,” he said. This includes “all that infrastructure that’s really hard to build and very expensive to acquire if you’re new to the industry,” such as an established board of directors, service providers, and legal counsel.
“A lot of room for innovation”
Despite so many ETF assets tied to major issuers, US Bank continues to see “a steady stream of new advisers entering the space,” according to Barolsky. There are also a lot of innovations in the ETF market, most of which come from new entrants.
This innovation “comes from start-up advisors or small advisors, whether you’re looking at developments in cryptocurrencies, or ESG strategies, or options-based funds,” Barolsky said. “There are a wide variety of new trends that all come from small advisors. So there’s still plenty of room for innovation here, and we’re going to continue to see it from new entrants into the space.
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