When it comes to the roll-out of an ETF share class for an existing mutual fund, outsourcing partners can make the process a lot smoother and cheaper. A tightly orchestrated ecosystem of existing outsourced partners can be the foundation of not just one launch, but multiple launches across a mutual funds range.
Right ecosystem, lower risk
For growing fund managers, the right outsourcing partners and an appreciation of how technology can be a force multiplier, are the formulae for success here. But it is important to understand the role of the various partners, what they bring to the table and how their contribution will be valuable in the long run.
Mutual fund managers should be able to outsource around 70-90% of ETF specific functionality, leaving the fund manager to focus on core responsibilities like investment management, oversight/governance and decision making around liquidity, disclosure and risk. The mistake which can be made here is where a manager seeks to own ETF operations, which can delay a launch or make it operationally more complex.
Why technology partners are critical
For a successful ETF share class launch, technology can be more important than for the day-to-day management of mutual funds. ETF share classes introduce new requirements, like intraday trading, daily portfolio transparency, in-kind tax mechanics and real-time coordination across multiple entities.
Without this strong level of technology integration, human processes can break under market stress.
A good technology partner like TrussEdge can support the share class’s basket construction (creation/redemption files), capital markets functions, real-time portfolio visibility and liquidity analysis/optimisation. Our systems can support dual share class accounting, delivering algorithmic reconciliation without the errors caused by manual processes.
iNAVs are a critical part of the puzzle
Also critical are the iNAVs: market data technology should be able to support the generation of indicative NAV dissemination, integrate with data/exchange feeds and also be able to work alongside market makers’ pricing models. It is critical that iNAVs are accurate to keep spreads tight and avoid the ultimate failure of the ETF.
Operational resilience
The hidden MVP in all this is connectivity, making sure the new demands for close integration between the key outsourcing partners for an ETF share class is in place. Sometimes this will require a level of pre-launch consultancy. We are happy to advise in advance of a launch on the necessary automation needs.
A modern ETF platform should be stripping out the need to use manual files, email-based processes and anything that might engender operational risk on high volume days.
What to avoid when launching an ETF share class
Fund managers should avoid the temptation to build too much internal infrastructure before an ETF share class launch or rely on legacy systems which will not be up to the new demands such a share class will place on the organisation. Speed and cost efficiency can be achieved using proven ETF infrastructure platforms and ‘on demand’ open APIs and integrations. COOs should focus on visibility and control rather than engineering. Can you see everything in one place and intervene when needed?
For the fund manager, the role should be one of monitoring the outsourced service providers, keeping tabs on the investment and operational risks of the ETF share class, maintaining escalation protocols and reporting to boards. It can help to set up an informal ETF Oversight Committee internally to keep an eye on operations, compliance, portfolio management and the external partners.
This outsourcing model works especially well for growing managers as it can reduce upfront capital needs, accelerate the share class’s time to market, and keeps operational head count down. It allows the core team to continue to focus on alpha generation and distribution activity.
ETF share classes, when properly supported, can also make a smaller fund manager look more credible, operationally ‘big’ without needed a huge head count.
Ultimately, the ETF share class should be viewed as an eco-system play rather than a build project. Fund managers should be able to allow their outsourcing partners to run the machinery and their technology partners to deliver that essential connectivity, automating and de-risking the ecosystem.
Enabling scalable ETF share class operations
ETF share classes introduce new operational demands that traditional mutual fund systems are not built to support on their own. TrussEdge provides a technology layer that connects ETF-specific workflows with existing fund infrastructure, automating key processes such as basket construction, reconciliation, and dual share class accounting.
This allows managers to launch and scale ETF share classes without rebuilding core systems, maintaining control, accuracy, and operational resilience as their product range evolves.
Related reading: Explore ETF Share Classes: What to think about before launch and Your Portfolio and General Ledger Need to Be Fully in Sync for additional insights on operational readiness and data precision.