ETF Services

Exchange traded funds (ETFs) can provide a pooled investment solution for investors seeking diversification, transparency, liquidity, lower costs, and more. Gemini provides a complete service offering to help capture the increasing demand for ETFs.

ETF Attributes

Transparency

ETFs are required to publish their holdings at the end of each business day with the Depository Trust & Clearing Corporation (DTCC). Investors can see a description and quantify each security the ETF holds, and therefore better understand what they are buying into.

Distribution

ETFs are bought and sold on the open exchange, eliminating the need for traditional mutual fund platforms, selling agreements, and required due diligence processes. There is no minimum to buy into ETFs, making them available to more investors who may not have the stated minimum investment required by most mutual funds.

Intra-day Trading

Because ETFs are traded like stocks, investors can use tools like limit orders to purchase shares only at a certain price. ETFs can be bought using strategies like shorting, which indicates an investor’s prediction the ETF’s underlying securities will decline.

No Market Timing Rules

The stock-like trading structure of ETFs means that there are no market timing rules. Investors are not required to hold ETF shares for any particular length of time.

Liquidity

Liquidity is typically measured in daily trading volume, but this does not apply to ETFs. Instead, liquidity can be measured by the degree to which a market maker can create or redeem shares of the ETF without moving the market of the underlying securities. Typically, the market marker creates or redeems a large order of shares without it affecting the value of the underlying securities. ETF trading specialist firms can also redeem shares, but do so in an effort to optimize expenses without moving the market.

Lower Expenses

The passive nature of ETFs typically means lower management fees than what is typically seen in mutual funds. This can make an ETF a more cost-effective product for advisors to use in their client portfolios. The client reaps the added benefit of no front-end loads used to pay commissions in mutual funds.

Tax Efficiency

ETFs have the potential to be more tax efficient than mutual funds because sales occur between investors. Through in-kind redemptions between the custodian bank and market maker, capital gains are not realized within the ETF when turnover occurs. If a mutual fund has a large redemption by a shareholder, the manager may need to sell fund holdings that could include appreciated stocks. The capital gains realized from this sale are distributed within the fund. Also, all shareholders of a mutual fund receive their per share portion of the tax burden for the stated year, regardless of how long the investor has owned the fund or even if the investor did not own the fund when the gains were realized.

Learn More About Starting and Managing an ETF

Higher creation costs and lower expense ratios create a higher break-even point for ETF managers. Gemini offers advisors a solution to combat these higher costs through our series trust. Our series (or shared) trust allows advisors to share costs like those incurred through compliance or board services.

Incentivizing investors to purchase an ETF can be difficult and requires a sound distribution strategy. ETFs are sold to the general public, but ETF transactions do not include the incentive fees of a 12b-1 fee, like mutual funds for broker-dealer platforms and representatives. A fund manager’s distribution strategy must include a plan for differentiating the ETF through education regarding the benefits of ETFs and how they can be used within a portfolio. Our ETF distribution services can assist fund managers in developing a distribution and education strategy.

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