The firm, founded by former Global X executives Cliff Man and David Tuckwell, is positioning itself as a homegrown alternative, with plans to offer a suite of low-cost, passive investment products tailored to financial advisers, managed accounts and everyday investors.
The firm will begin by launching a range of exchange-traded funds (ETF) on Cboe next month, including a US Quality ETF, a Magnificent 7 ETF, and a US Technology ETF.
According to Tuckwell, the idea behind ETF Shares is simple: leverage deep local expertise and a sharp understanding of Australia’s adviser- and retail-driven ETF market to outcompete global players for market share.
“These companies don’t come around very often. There hasn’t been a new one in over 10 years,” Tuckwell told InvestorDaily, noting that the local market remains highly concentrated.
While the US has over 100 index ETF issuers, and the UK and Canada have dozens, Australia has only a handful.
“We’re glad to enter and bring some more competition to the markets,” he said.
Australia’s ETF market stands out in another significant way: its reliance on advisers and retail investors. Man pointed out that in Australia, “the advisory space, which are the intermediaries, as well as the retails, are the primary users of ETFs”, compared to the more institutionally driven markets of Europe and the US.
“With our team of expertise, because [we’ve been] in the market for such a long period of time, we know the market dynamic here. From a regulatory perspective, we have much deeper knowledge about how the landscape changed since the royal commission a few years back,” Man said.
“It wouldn’t be something that overseas ETF issuers, when they plan to enter into the market, will have a good grasp.”
Tuckwell echoed the sentiment, explaining that global investment banks often have a different mindset.
“If you’re a giant European or American investment bank, you don’t want to be selling ETFs to mums and dads or high street advisers. You want to be selling them to giant pension funds, selling them to hedge funds, or selling them to some other kind of institutional investor,” he said.
“The DNA of a lot of these overseas financial giants isn’t really geared to the rules of the road here in Australia,” he said. “I think that’s a competitive advantage for us, not only having that in-house expertise, but also having the willingness to do it as well.”
The firm, which boasts decades of combined experience in the local market, is betting that its local expertise, coupled with a low-cost approach, will be a key differentiator.
ETF Shares will start by offering a management fee for most of its funds at 29 basis points, far below the Australian average of around 1 per cent.
For financial advisers, Man highlighted the growing appeal of passive ETFs as underlying products for managed accounts.
“The usage of ETFs, for multiple reasons, is so suitable for constructing portfolios for SMAS and MBAs, because they’re low cost. And for the adviser, to use these vehicles as compared to active funds, the rolling costs year after year will be very significant,” he said.
“So we’re committed to serve the advisory market by helping those MDA and SMA users, whether they’re direct users or fully intermediary, to achieve that goal.”
Looking ahead, Tuckwell highlighted the pivotal role ETFs play in Australia’s wealth management sector, driven by the country’s superannuation system and the savvy nature of local consumers.
“Because of the superannuation system in Australia, you’ve got the wealth management industry, which the ETF industry these days is at the beating heart of,” Tuckwell said.
“Australian consumers, when it comes to financial services, are actually very savvy … and I think there’s a lot of evidence out there now that shows that index funds, and as part of that, ETFs, do the right thing by consumers compared with your more legacy active funds.
“The fees are lower – meaningfully lower – they’re fully transparent, and they’ve been around for long enough now that they’ve proved themselves through various market cycles.”
Tuckwell believes this is only the beginning for Australia’s rapidly growing ETF market. The firm is confident that, by the turn of the decade, the market will expand to $1 trillion, a significant leap from its current size of $250 billion.
“We want to be part of that, and we think we’re just at the beginning of a journey,” Tuckwell said.
