Deborah Fuhr is Managing Partner & Founder of ETFGI, the dominant independent research and consulting provider providing insights on the entire global industry of ETFs and ETPs listed globally as well as the service providers.
Jobs in ETFs chatted with Deborah in advance of the upcoming ETFGI Global ETFs Insights Summit in Toronto about her core values, challenges, what’s hot on her radar, her advice to the ETF industry, a passion for wild animals and anti-gravity yoga.
“When you become an entrepreneur, hotels become your virtual office, you learn how to do a lot of things on your own, even fixing a printer using tweezers…It’s fun, exciting, a lot of work but very rewarding.”
Jobs in ETFs: You recently relaunched your event series as the ETFGI Global ETFs Insights Summit, to take place in New York, London, Toronto and Hong Kong. First up is Toronto on December 2nd. Tell us a bit about that event and what attendees can expect to take away.
Deborah Fuhr: There’s a real need for a series of events that allow substantive conversations on regulatory changes impacting the market structure, trading, product development and the use of ETFs.
We bring together exchanges, ETF issuers, lawyers and ETF users to discuss how they are using ETFs, how regulations are changing and what can come to market. We’ll discuss ETF due diligence, portfolio construction, and look at the future of ETFs. I’ll present a recap of the findings we have from our monthly research looking at trends from the past to today and where I see things going.
We have a great agenda and an excellent speaker faculty that can be viewed here. We’ll have a sponsored session for networking in the afternoon to give people a chance to informally talk about various topics and get to know each other.
Attendees are eligible to receive 6 hours FP Canada-Approved CE and will receive free copies of the CFA’s ‘Comprehensive Guide to ETFs’ book. The event is free for buy-side institutional investors and financial advisors to attend.
JiE: You’re one of the most recognisable faces of the ETF industry globally today, and have been for some time. Take us back to before ETFs. Where does the interest in finance and research come from and how did you get into ETFs?
DF: I had an interesting introduction. My brother who was working for Greenwich Associates recruited me as the pitcher on their womens’ softball team which led to me being offered the chance to work for them. It was a great experience and, when graduating from Uni I told Charlie Ellis that I would like a job with them. Charlie was well known for his article and book ‘The Loser’s Game,’ essentially saying that professional investors have a very hard time beating the benchmarks – he did one of the first studies looking at how many active funds didn’t beat the S&P 500.
I became a research analyst at Greenwich Associates and that’s really where my interest in indexing started. While going to business school I helped them set up consulting programmes in Tokyo and really got the bug for working outside US.
After graduating, I had the opportunity to move to the UK with a different consulting firm and was approached by Morgan Stanley to join them as the Head of Marketing for Opals and ETFs. That was in 1997 when there were 21 ETFs and $8 Bn in AUM so it has been a pretty amazing journey from where I started to where things are today in terms of assets growing to $5.95 Trn and over 7800 products.
JiE: Do you consider it as a passion or a profession, or both?
DF: I have to say ETFs and the industry is both a passion and profession. I have made so many friends and it’s a great thing to be part of. Every day there’s something new and different.
JiE: What core values have served you throughout your career, taking you to where you are today?
DF: A natural curiosity, high self-motivation, never making assumptions, telling people that I don’t know what I don’t know and always checking the facts.
JiE: Any particular advice you’d give to somebody entering the ETF industry today?
DF: Be true to yourself. Be self-motivated. Realise that you don’t know what you don’t know. I’d also say that networking is very important.
JiE: You’ve experienced both multinational corporations and entrepreneurial business. Can you share some insights on how they differ and what it takes to succeed in two very different environments?
DF: There’s always a support system when working in a large corporation. Travelling around the world you always have a place to go where you can get a phone, help with your computer or assistance to set up meetings. When you become an entrepreneur, hotels become your virtual office, you learn how to do a lot of things on your own even fixing a printer using tweezers:-) It’s fun, exciting, a lot of work but very rewarding.
JiE: Biggest challenge in your career to date?
DF: Saying no. If I’m asked to get involved in an interesting project I’m always curious. I want to be able to do everything and finding the balance between what I should or shouldn’t do is still my biggest challenge.
JiE: You’ve been at the heart of a growing ETF industry in Europe for 20 years, and there’s still so much room for growth. How do opportunities now differ from the early days?
DF: In the early days both internally and externally it was hard to get support for ETFs. They were this quirky thing and people were more interested in talking about products that would pay them more commission or higher fees. Most people wanted to be paid to sell products and “Go away” was the most typical response I got in the early days.
Now you get calls from people you don’t expect, wanting to launch ETFs or wanting to discuss how they might use ETFs.
JiE: That’s reflected in assets with global ETF assets now over $5.95 Trn and continuing to eat into the $45 Trn global mutual fund market. However, the ETF footprint as part of the overall asset markets is still small. Where do you see future growth coming from, both in terms of strategies and regional opportunities?
DF: ETFs are still small relative to mutual funds but they have grown quickly. It took mutual funds in the US 66 years to reach $1 Trn. ETFs listed in the US hit that mark in only 18 years. We have seen that the industry assets are doubling every five years, so there has been very significant growth against real headwinds where advisors in most markets outside the US were being paid to sell products. That changed in Australia, the UK and Holland – now it has changed also across Europe, for independent advisors.
We’re seeing many changes that are helping ETFs become the democratic product that they are. They’re unique in the sense that they’re the only product that I know of where you find hedge funds, pension funds, financial advisors and retail having access to the exact same tool box with the exact same small annual cost and small minimum investment size.
Although ETFs are still small relative to mutual funds, at the end of the third quarter of this year, the ETF industry is $2.54 Trn bigger than the global hedge fund industry having only overtaken hedge funds in June 2015.
ETFs continue to grow and I believe they will continue to grow significantly, especially as we see many asset managers wanting to use the ETF wrapper. Many active asset managers want to launch ETFs – we’ll see significant growth there. We’re also seeing growth in ESG, thematic, fixed income, so more asset classes and more types of exposures are being wrapped into ETFs. More people are using them whether it’s institutions, advisors, or retail and they’re being used in more ways. Once an institution or an advisor tries, and finds they work, they tend to use ETFs more, invest more in them and use them in more ways and hold them for longer time horizons.
JiE: European ETFs are close to hitting $1 Trn and may do so by 2020. What ETF strategies do you see leading the growth and where is the ceiling for European ETFs?
DF: ETF assets in Europe right now are sitting at $940 Bn, so very close to hitting through that $1 Trn mark as you noted. Many investors in Europe used to buy US listed ETFs because they perceived the products in Europe to be less liquid and not having the same tool box. After the alternative fund directive when all non-UCITS products became alternative investment funds, we have seen a lot more investment by Europeans into UCITS ETFs along with more investment from Asian and Latin American investors into UCITS so there’s significant growth from institutions in Europe and around the world, excluding the US, buying these products.
The financial advisor and retail market is growing, albeit very slowly because many of the mutual fund platforms don’t yet offer ETFs since they don’t have connectivity to the exchanges but we’re seeing movement in the right direction. We also see robos and other types of tech embracing ETFs.
The future in Europe is bright. If we had a consolidated tape, that would help people feel more comfortable. After MiFID II we saw that there was transparency on the amount of trades being done, but about two thirds of the trades are being done off exchange, so people don’t see that on exchange liquidity. RFQ platforms are very popular.
The real challenge in Europe is education – to be fair, that’s still the real challenge around the world as we see new benchmarks, new types of products, new people using ETFs for the first time, education is a real impediment to the level playing field that we need for ETFs.
JiE: If you had a super power what one thing would you change about the ETF industry today?
DF: It’s very difficult for people to open a brokerage account – it takes 20 clicks. If you wanted to put on a bet, it takes two clicks. Making it easier for people to open bank accounts and to open brokerage accounts would be the thing I would change, because the pool of assets that ETF and investment products could avail themselves of gets much bigger instead of going after the exact same asset pool.
JiE: One piece of advice that you’d give to the ETF industry today?
DF: The ETF industry still needs to work together a lot more on education and thinking about how we classify products so that there is clarity and understanding for investors.
JiE: What’s hot on Debbie Fuhr’s radar? What’s caught your attention recently – whether regulatory, product, regional or other?
DF: I’m just back from the U.S. where there are two developments that will be looked at from around the world. First, the “ETF Rule”. Historically ETFs coming to market in the U.S. had to go to the SEC and ask for exemptive relief, a process that typically took anywhere from 180 to 680 days. The “ETF Rule” now allows products to come to market without asking for any special permission, creating a level playing field for ETFs and mutual funds which never had to ask for that exemptive relief.
It also means a level playing field for ETF issuers as firms that received exemptive relief before others often had different types of exemptive relief than firms that came later. This will bring more products to market and encourage more firms looking at ETFs to partner with existing players or even acquire.
The other regulatory change that will also be looked at around the world is periodically disclosed ETFs. As part of the “ETF Rule”, the SEC has decided no longer to require the distinction of whether a product is active or index. Some call periodically disclosed ETFs, non-transparent active, a term that I dislike because it makes it sound like these products would never disclose their holdings.
Precidian has been approved to launch products that would not provide daily transparency – it could be quarterly like mutual funds or daily, weekly or monthly. We’re likely to see many firms, especially in the equity space using strategies where the portfolio manager doesn’t want to disclose their secret sauce for fear of front running or being copied, coming to market.
Precidian has currently licenced their patented process to 14 different firms and the expectation is that we’ll see someone bring a product to market some time in the next six months. There are also periodically disclosed ETF models before the SEC from other firms including Fidelity, Invesco, Natixis, Eaton Vance and T. Rowe Price so it will be interesting to watch how this evolves.
We also know that IOSCO and the FSB is still looking at ETFs in terms of a concern around the role of market makers and authorised participants and whether or not there are concerns for systemic risk. We expect a paper from them sometime before the end of 2020 and we also know that IOSCO is starting to look at the role of index providers and will probably be doing a consultation there.
JiE: One thing to look out for in ETFs in 2020 in either US, Europe or Asia – or all of the above.
DF: 2020 will see the 30th anniversary of the first ETF listing which is a big one – March 9th marking the 30th anniversary in Canada.
November 11th was the 20th anniversary of the first ETF listing in Asia, the Hong Kong Tracker Fund, and April 2020 will mark the 20th anniversary of the first ETF listing in Europe. These anniversaries are something that many of us will be celebrating around the world.
JiE: You also recently co-founded ETF TV. Tell us more.
DF: I founded ETF TV with Dan Barnes and Hamish McArthur, who had their own shows – Trader TV and Trade Finance TV. The idea is to have substantive conversations around opportunities and challenges and how ETFs can be part of the solution. Feedback has been great and anyone interested in the content can visit www.etftv.net.
JiE: You have been with Women in ETFs since the beginning and have just celebrated the 5th anniversary. How is it changing the ETF industry?
DF: Five of us founded Women in ETFs five years ago – Joanne Hill, Sue Thompson, Michelle Mikos, Linda Zhang and myself and it has been an amazing growth story. The whole idea is to connect, support and inspire, getting women into the industry and improving diversity and so many members have given positive feedback on how it has helped their careers. We now have over 5300 members, 15% of whom are men, with chapters all over the world from North America to Europe to Africa and Asia.
We have a speaker’s bureau to help conference providers and the press connect with women who are interested to speak on relevant topics. We do mentorship, university outreach and we partner with UN Women, UN Global Compact, The Sustainable Stock Exchange Initiative, World Federation of Exchanges, and the International Finance Corporation to ring the bells at stock exchanges to celebrate International Women’s Day which is March 8th each year.
It’s great fun to experience different bell-ringing ceremonies around the world – Johannesburg is the loudest bell ringing I’ve ever been to where they blow animal horns and everyone gets their own bell to ring.
Five years ago we rang nine bells – a couple of months ago we rang bells at 85 exchanges around the world! Great high profile exposure for a great cause.
JiE: How do I become a member?
DF: There’s an application form on womeninetfs.com. There’s no cost to join and we don’t charge to attend events. In addition to bell ringing, we do educational events and professional development events. Everyone in the industry is welcome to join.
JiE: Let’s change direction with a few personal questions. Place in the world that surprised you most?
DF: I have to mention Iran where I was invited by the regulator a couple of years ago. I really didn’t know what to expect and found everyone to be very nice and very smart.
I have a passion for animals and wildlife and my grandmother was born in South Africa, so I have an affinity for South Africa and Africa in general so getting to Kenya was special. I visited an elephant orphanage where they rescue baby elephants that have been orphaned as a result of poaching. At the time they had 36 little baby elephants running around that would go out into the surrounding area during the day and come back to be fed. So much fun. I also visited a giraffe centre where they are trying to help the Rothschild breed of giraffe which is on the verge of extinction.
JiE: Favourite dish to cook?
DF: Best answer is takeaway – saves time so more time to do things I want to do.
JiE: Omnipresent might be a slight exaggeration, but you’re known for tireless non-stop travel. How do you keep it up? Is there a secret sauce that you take?
DF: I wish there was a secret sauce! Listening to your body is definitely key. When I’m travelling, I think about the time in the place I’m going to and adjust and eat and sleep with that in mind. It’s important to make sure you get enough sleep, or at least get some sleep, because you can function if you’re hungry – I find it harder to function if you’re really tired. Getting outside and walking, getting some sunlight, helps a lot and trying to exercise. I try to be careful what I eat and drink because I think that also helps or hinders you.
JiE: Is there something outside of work that you do to disconnect or reboot?
DF: I don’t view work as just work as I enjoy it a lot. Many of the people I engage with are friends, so there’s not that clear distinction. I exercise or go to museums for example when I have the opportunity. Keeping fit is really important to being able to travel and do your job, and I try to do new, different things.
My most recent kick is trying to become proficient at anti-gravity yoga which is much more challenging than it sounds. If you’re good at it, which I’m definitely not as I’ve only been doing it for a couple of months, it’s a little bit like ‘Cirque du Soleil’. It helps elongate your spine and improve your balance and core strength and I’m having great fun trying to get a bit better!
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