Contributing Firms:
ETF Innovations
Innovation remains strong in ETFs sphere as can be seen in areas such as personalised direct indexing or the increasing numbers of thematic ETFs based on everything from an executive’s ‘character’ to the ‘Metaverse’. What significant ETF product innovations, or areas of product innovation, could you see in 2022-23?

Meliosa O’Caoimh, Country Head, Ireland, Northern Trust: Globally there will likely be increasing adoption of physical crypto-assets in ETFs, and not just via the unregulated exchange traded vehicles such as certificates and notes that have largely been the focus of managers to date. As competition grows, regulators are under pressure to be more open to digital assets and to consider how these can be incorporated into regulated fund structures.
Meliosa O Caoimh
Meliosa O Caoimh

From our perspective as an asset servicer to funds, the relatively new characteristics of digital assets have to be incorporated not just into our administration processes, but also our broader thinking to anticipate our clients’ evolving requirements. Crypto staking is emerging as an investment strategy in its own right, not just a passive revenue stream.

Administering these kinds of investments may require real-time data handling and interaction with a more unstructured universe of external parties compared to more traditional asset classes. Continuing to expand our data capabilities to support these evolving assets is among our key areas of focus for the future.

Additionally, the transparency of ETF portfolios continues to be an important topic for actively managed funds. Irish Funds’ response to IOSCO’s Consultation on Good Practices for ETFs was supportive of alternative approaches to full transparency, with options suggested around frequency of publication, and substitution methods. We expect to support innovation in this area as the transparency requirements are adapted.