A former head of the world’s biggest commodity ETF is going it alone at a challenging time.
is founder and chief executive officer of ETF issuer GraniteShares in New York, established in 2016. He is betting that the world needs more exchange-traded funds focused on commodities, even though commodity prices only recently began to emerge from a terrible five-year stretch.
Then again, the 38-year-old native of Aberdeen, Scotland, was part of a success in commodity ETFs: Before GraniteShares, he was CEO of World Gold Trust Services, sponsor of
the $33 billion gold fund.
His new company launched its first two ETFs in May:
(COMB) and GraniteShares S&P GSCI Commodity Broad Strategy No K-1 ETF (COMG). The company has received funding from a number of investors, principally Bain Capital, which is a shareholder.
Mr. Rhind—whose ETF career began with iShares before he helped launch ETF Securities—spoke with The Wall Street Journal about the challenge and opportunity of his ETF gambit. Edited excerpts from that interview follow.
WSJ: Why did you decide to launch your own ETF company?
MR. RHIND: Growing up in Aberdeen, we’ve got some great role models, particularly in financial services. You’ve got great entrepreneurs like
He went to the same school that I did in Aberdeen and was a big role model for me growing up. I’d always wanted to get onto the entrepreneurial side and eventually run my own business, but you need experience.
You have to gain the necessary experience and stature in the industry before you can credibly go out on your own.
WSJ: How did you secure funding?
MR. RHIND: When you’re backing a company at such an early stage you’re really backing the people, because there is no business. When they invested in us, the company was really just a PowerPoint and an Excel spreadsheet. We had a very clear vision for what a new kind of ETF company looks like. If you’re an ETF entrepreneur, that often means you’re the equivalent of an inventor in a garden shed and you come up with a fund idea and think “Hey, this would be a great ETF.” But very few of those people really think about how to build a company. Coming up with one idea is hard enough, but coming up with multiple ideas and a broader strategy is even more difficult.
WSJ: What does it take to start an ETF company?
MR. RHIND: A company that enters the ETF space has to do four core things. You have to be multi asset class—offer products in fixed income, equities, commodities. The market’s always changing, and there’s not one asset class that will always be in vogue. Then on the product side you need to compete on price. That literally means offering a low-cost product and competing with the likes of
or Vanguard or the other big players. Third, you need to be able to innovate, and bring a superior engineering skill to the actual fund construction. And then lastly, most importantly, you need to be original. You need to be able to bring new ideas to market.
WSJ: It’s a crowded market. How do you stand out to investors?
MR. RHIND: Any industry now is competitive. There are plenty of ETFs and there is plenty of choice out there. But we have to keep in mind that on a relative basis, there are still very few ETFs versus mutual funds. There are now just over 2,000 ETFs, but there are over 7,000 mutual funds, and there are still mutual funds coming to market every day. So there’s still a lot of room to grow, compared to the legacy mutual-fund business.
WSJ: Why do you see room for growth in commodities?
MR. RHIND:I’d rather be launching a business close to the bottom of a cycle than the top. If you look at the performance of commodities over the last five years, we’ve had a horrendous bear market, which turned around last year and delivered the first positive performance in five years. Who knows where we’ll end up at the end of this year, but the signs are that commodity markets are finally turning the corner.
Mr. Cowan is a writer in Northern Ireland. He can be reached at email@example.com.
Appeared in the July 10, 2017, print edition.