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Rating:Here's How an RIA Inspired BlackRock's Latest, M*-Powered ETF Design Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, April 10, 2015

Here's How an RIA Inspired BlackRock's Latest, M*-Powered ETF Design

Reported by Neil Anderson, Managing Editor

Business people across the spectrum, including fundsters, often describe new products or services as being developed in response to customer demand or feedback. In the case of a new iShares [profile] ETF from BlackRock, it was a single, prominent RIA who gave the asset management giant a nudge.

Last month Hollie Fagan, head of BlackRock's dedicated RIA business, unveiled the iShares Exponential Technologies ETF (XT). The new fund is the brainchild of Edelman Financial Services chairman and CEO Ric Edelman and is powered by the new Morningstar Exponential Technologies Index, to track "companies identified as leaders across key areas of technological transformation.

Edelman himself clarifies that he and his eponymous financial planning firm have no subadvisory relationship with the fund, or any official partnership or relationship, and they receive no income from the fund or the index. He says he couldn't find an investment product like this in the marketplace. So, in his words, he "got the ball rolling."

"We were looking for a fund that provided exposure to companies that are exploiting exponential technologies, " Edelman tells MFWire. "I asked BlackRock if they would be interested in creating an ETF of this type. They thought it was a great idea and agreed to do it. They went to Morningstar."

"BlackRock of course is the market leader in the marketplace," Edelman adds, noting that his firm already uses many iShares ETFs and has worked with the ETF titan for a decade. "It was natural for me to call them first ... I'm very grateful to them for creating it."

"This ETF is testament to BlackRock's willingness to create innovative products when requested by a member of the financial community and a continuation of our community to democratize access to markets for all investors," Fagan states.

As for Morningstar, index chief Sanjay Arya says that BlackRock approached them about the exponential technologies index idea in the fall of 2014. His team of more than 100 equity analysts "defined nine unique trends or technologies," then identified future leaders in each of those nine areas. He puts the new index in the context of Morningstar's efforts at "harnessing intellectual capital" to create thematic indexes that he sees as eschewing the traditional alpha-beta divide.

"There is going to be more and more need [to design] products with meaningful, sustainable alpha," products that "unite the best of active and passive together," Arya tells MFWire. "This is a great example of that."

As for Edelman, this isn't the first time he's helped inspire new investment offerings. For example, in the 1990s he patented the "Retirement Income for Everyone" (RICE) trust annuity product, which he asked SunAmerica (now part of AIG) to build. And in the 2000s he worked with Diana Cantor (now head of Virginia's retirement system) to help create the Virginia 529 plan.

BlackRock now offers more than 700 iShares funds worldwide, holding more than $1 trillion in assets under management, as of December 31.

Through 41 offices around the U.S., Edelman manages $14.4 billion for more than 26,000 clients, also as of December 31. 

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