IndexIQ, one of the top ETF providers primarily focused on liquid alternatives and active fixed income ETFs, has entered the environmental, social and governance funds market. The recent launch of its four ESG ETFs is accompanied by a rebound. They focus on a dual impact mission of delivering returns to investors and channeling a portion of their management fees to leading nonprofits aligned with each fund’s theme.
Founded in 2009, IndexIQ’s initial goal was to offer alternative investments to investors in liquid form. The ETF issuer was purchased by New York Life Investments in 2015 to expand its product line. Since then, it has added various equity and bond funds to its lineup, reaching $ 4.6 billion in assets under management across 24 ETFs.
His clientele consists mainly of financial advisers from large brokers such as Morgan Stanley, Merrill Lynch, Wells Fargo and UBS. It is also aimed at registered investment advisory firms, institutional investors as well as retail investors.
IndexIQ intends to provide some of the best ETFs
IndexIQ strives to provide investors with access to smart investment strategies, said Jon Zimmerman, chief operating officer and general manager of the company. For the four ESG funds, the expertise comes mainly from the asset manager Candriam. The Europe-based company has extensive expertise in ESG investment. Candriam is also a subsidiary of New York Life and manages over $ 170 billion in assets for clients in Europe, Asia-Pacific and the Americas.
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Zimmerman joined New York Life Investment Management on its acquisition of IndexIQ. He spoke to IBD about the company’s mission, new funds and its economic outlook.
IBD: When and with what mission was IndexIQ launched?
Jon Zimmerman: IndexIQ was created with the mission of providing innovative and thoughtful solutions to investors. We started with a specific objective to provide the market with access to alternative liquid strategies in an ETF vehicle, something that had not been done before. The company launched its first ETF IQ Hedge Multi-Strategy Tracker (QAI) in 2009 and since we have expanded our range of liquid alternatives to various asset classes.
ETFs as a life insurance product
IBD: Why did New York Life Investments pursue this path?
Zimmermann: Prior to the acquisition (of IndexIQ in April 2015), New York Life Investments recognized investor trends and changing demand for ETFs. Known for their tax-efficient structure, low cost and transparency, ETFs have proven to be the obvious next step in expanding New York Life Investments’ product line. The acquisition of IndexIQ presented an attractive opportunity to acquire market-leading strategies in the range of alternatives. And to also serve as a platform to extend the ETF product line to equities and fixed income, we leverage the broad capabilities of the multi-store organization.
IBD: Which were the best and best performing exchange traded funds from a performance and flow perspective, and why?
Zimmermann: Our two largest strategies are QAI and IQ Merger Arbitrage (MNA), two liquid alternative strategies that now have over ten years of live experience. More recently, we have seen strong adoption of our actively managed municipal strategies and our ESG-focused action strategies.
How is IndexIQ different from other ETF providers?
IBD: How does the ETF launch strategy differ from other companies?
Zimmermann: We are deliberate in the development of our products – only launching strategies that we have a high degree of belief and research to back up. Since the creation of our firm, we have made it a priority to think strategically and critically. We research diligently and stay true to a philosophy of providing investors with solutions that are both unique and useful.
We want to do everything we can to ensure that any strategy is not only well designed for our clients, but also correctly positioned for how they can use it in a portfolio in any market cycle.
IBD: How do you decide which fund to launch?
Zimmermann: From a functional point of view, we have an internal research and development team which acts as a central hub for all new strategies. Ideas can come from a variety of places. It is essential that strategies fit into the general framework of who we are. And what we offer our customers, and what their needs are. Any strategy that we consider must be clearly differentiated strategies with clear applications, both strategic and tactical in the portfolios.
How do double impact funds fit in?
IBD: Please describe the latest dual impact funds? What does double impact mean?
Zimmermann: This year, we launched four new ‘double impact’ thematic ESG ETFs, designed to provide value-oriented investors with access to unique investment strategies. Each ETF was launched in agreement with a leading non-profit organization that is related to the theme of the fund, such as heart health, climate action or gender equality in the workplace.
What makes the “double impact” unique is the real impact component. We have incorporated the mission of these leading organizations into our market assessment. We reinvest part of our management costs in the important missions of these organizations.
IBD: Why did you decide on this?
Best ETFs focused on ESG investing
Zimmermann: Through our research, we learned that one in two investors are inclined to invest with their stocks in the same way that they might buy or boycott companies due to factors such as their environmental impacts or the way they treat their assets. employees.
We believe that working with leading nonprofits and interest groups with deep expertise in critical areas of sustainability enables us to provide access to the best of ‘me driven’ returns and social good ‘ focused on us ”. Our partnerships harness our shared commitment and values into an investment strategy for real impact, helping investors do well while doing good.
IBD: What funds do you have in this area and what exactly are they investing in?
Zimmermann: The ETF IQ Healthy Hearts (HART) was launched in February this year. This is a mission-aligned heart health ESG ETF developed with the American Heart Association to help people live longer, healthier lives. HART invests in sustainable development-oriented public enterprises relevant to AHA’s initiatives, research and core programming.
The ETF IQ Cleaner Transport (CLNR) was launched in agreement with the National Wildlife Federation. It provides exposure to selected global companies that are contributing to the advancement of more sustainable transportation through cleaner energy products and solutions.
The ETF IQ Engender Equality (EQUL) was launched in agreement with Girls Who Code. It provides exposure to select US companies that are at the forefront of promoting and advancing gender equality in the workplace.
The IQ Clean Oceans ETF (OCEN) was launched in agreement with Oceana. It provides exposure to some global companies that are taking action to mitigate damage to the oceans through their products or services.
IBD: Are you planning to launch more?
Zimmermann: We are unable to comment on specific future launch plans, but we have a strong pipeline of ideas. Since we believe we are doing more than just launching a new range of ETFs, we are creating a whole new movement by providing investors with ways to do well while doing good.
ETF Market Outlook?
IBD: What is your current economic outlook and the outlook for ongoing ESG changes?
Zimmermann: We are monitoring earnings closely at this time as strong earnings are essential to support these valuations, but most signs are positive so far. We believe that the rise remains in the markets, especially in equities. But it’s important to be intentional about how a portfolio is allocated. As for ESG, beyond flows, we see investors demanding more from the companies in which they invest. We believe this trend will only continue.
IBD: What would be your message to ETF investors now?
Zimmermann: 2021 has turned out to be another exciting year of growth in the ETF industry as we have seen assets grow and product launches across all asset classes. Our message is to stay invested no matter the headwinds, and stay diverse. And keep a close eye on your portfolio to make sure your investments not only meet your goals, but align with your values and beliefs.
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