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The Success of $HACK and What it Means for Marketing Your Next #ETF

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Working with boutique ETF issuers, index providers, white label platforms, asset managers turned ETF sponsors, ETF managed portfolio strategists and RIAs that invest solely with ETFs, we’ve seen and heard from a wide range of the players in the business.  Just about everyone wants to know how they can make their PR and marketing efforts a success. 

Whether we are brainstorming blog post ideas, coming up with messaging points around a new product or prepping a client for their next TV appearance, we are constantly challenging ourselves and our clients to articulate what makes the story different. The surge in popularity of ETFs and the increasing number of new products and new issuers coming to market has made it increasingly difficult to stand out without the right marketing approach.

But, the success of one product that we helped launch in November 2014 is instructive for the overall outlook for the ETF business and new products coming to market.  PureFunds, in conjunction with ISE ETF Ventures, launched the first – and currently only – cyber security ETF.  The product’s ticker, HACK, earned the distinction for “ticker of the year” from ETF.com.  But, it was the ETF’s direct focus on an unexploited segment of the market that made it primed for success. Cyber security, as well all know, has become a frontline issue for businesses, governments and individuals as information thefts, cyber attacks and digital criminals have become routine in our headlines for nearly 18 months.

Students of marketing will tell you that the success of marketing depends on the “4 P’s” — product, place, promotion, price.  Bringing an innovative product to market that is built on a fundamentally index or investment thesis is critical for a successful launch.  What is the ETF or ETP supposed to do? Is it pure exposure to a sector? Is it a rising interest rate defensive play? Is it supposed to provide income during periods of market volatility?  That needs to be defined.   In the case of HACK, the purpose of the product was obvious and clear from the out.

As for place, there has never been a better time to bring a quality ETF to market.

Certainly, there is a lot of noise and competing products.  But, in the ever-competitive world of keeping assets under management, ETF portfolio strategists, RIAs and broker-dealers all are looking for the best ideas for bringing clients desired market exposure at the lowest price.

The issue of price, in marketing an ETF or exchange-traded product, comes down to the product construction.  As a rules-based or index product, the issuer can provide exposure to growth at a fraction of the price an investor would have to pay an active manager. Here, the ETF still wins.

The final “P” is promotion and this is where the marketplace receptivity for a new ETF can be most influenced.  In the case of HACK, the team behind the product made it clear to our account team that they envisioned a proactive, nimble effort to use the ongoing headlines as an entry point for highlighting the relevance of the cyber security theme. Articles, TV appearances, bell ringings, webinars, web advertisements, social media, blog posts and more were put to work to elevate the presence of the product.

With more than $900 million in AUM as of this writing, the success of PureFunds’ HACK has no doubt left any number of current and aspiring ETF issuers wanting to come up with “the next HACK” for their lineup.  

My counsel as someone who has helped more than a dozen issuers launch products is to follow the example: 

1) Focus on a product that meets a specific need in the market. You better be able to explain in three sentences or less what void the product is filling or new benefit it provides.

2) Recognize that, due to innovation and fee sensitivity, lower cost products have the best chance of gaining traction.  Both institutional and retail investors are savvy to the idea that investment expenses can have a significant impact on returns.

3) Be aggressive and creative in promoting the product. Don’t blow a billion dollar idea by failing to invest in the marketing of the concept.

Read more about our thoughts on marketing and PR ideas for investment and financial services industry firms here.

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