In this episode, Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, is joined by Aisha Hunt, Founder of Kelley Hunt & Charles, to discuss the growth of the ETF industry, and where the next wave of opportunities exist for asset managers entering the industry.

Douglas and Aisha discuss:
· The growth of ETFs
· Best tips for individual and firm success
· How asset managers can best grow their ETFs

[TRANSCRIPT]

Douglas Yones:

Hello and Welcome to ETF Central The Podcast where we bring the latest and greatest ETF industry perspectives directly to you through in-depth conversations with key thought leaders from across the ETF ecosystem. I'm your host, Douglas Yones, the Head of Exchange Traded Products at the New York Stock Exchange, the Home of ETFs.

Now, today I'm joined by Aisha Hunt. Aisha is the founder of Kelley Hunt & Charles, she is also an ETF industry veteran, she brings more than two decades of financial industry experience to the asset managers that she advises.

Aisha, a key lawyer in our industry, and I just want to say thank you so much for taking the time to be here today.

Aisha Hunt:

Thank you, Doug, for having me. I really appreciate it.

Douglas Yones:

So, on this podcast so far, we've not really gotten into the legal world, but I think this... At least for me, I'm really excited to do this. You and I have known each other for some time. You're well known across the industry. You bring a whole different definition and perspective to everything we do each day. I'm hoping we can start though by telling everyone a little bit about your current role. What is it that goes on day in and day out at Kelley Hunt & Charles? How are you and your team spending your time?

Aisha Hunt:

So I founded Kelley Hunt & Charles about a year and a half ago, and the goal really is to serve as a trusted advisor to asset managers. So for selected asset managers we'll serve as external general counsel and assist with all aspects of the asset management business. Our focus really is on helping managers trying to most effectively move forward with product development initiatives with a particular emphasis on ETFs, whether that be launching ETFs, converting mutual funds to ETFs, mimicking mutual fund strategies in ETF wrappers, as well as working through product rationalization initiatives with managers that have significant fund families. So we're very focused on helping managers really navigate whatever their business objectives are in the asset management industry.

Douglas Yones:

The thing that's always struck me as unique with our industry, and I guess it's always been my personal respect for the law profession, is that the lawyers that surround the ETF ecosystem and the work you're doing, a lot of what you talked about, yes, of course there's a legal process and a legal role, but you're also acting as consultants, right? I mean, you're actually advising and guiding and helping and supporting your clients as they grow out their ETF and asset management business. Does that strike you as odd, or are you just so used to it at this point?

Aisha Hunt:

I'm so used to it. It's the way I've always approached practicing law, and it goes back to this idea of really being a trusted advisor who's taking into account legal issues, while you're really helping to contribute to the business objectives of whatever your clients are trying to achieve. So we really try to sit at the table and take into account not just the legal issues, but really the landscape, the business landscape, the legal landscape, and the service provider ecosystem, and we help our clients really effectively achieve their objectives by just taking into account every aspect of what we've learned throughout our careers. My partner, Ryan Charles, has also spent over two decades in the industry, and so I think the collective expertise that we bring to the table really covers inside base-ball insights with respect to every aspect of every service provider that supports ETFs as well as mutual funds and other 40 Act products.

Douglas Yones:

So take us a little bit, Aisha, through your background, you've had quite extensive experiences. How did you get here where you're founding and running your own firm?

Aisha Hunt:

Sure. So I started my career 23 years ago as an associate at Wilson Sonsini, representing private funds and private fund managers, including the likes of Sequoia and Mayfield, and really helping to ensure that their funds did not have to register under the 40 Act. I was recruited to Dodge & Cox as the second attorney hired in the history of the firm since it was incepted in 1929. I've also served as General Counsel at ALPS where I oversaw their asset management, administration and distribution business, and more recently was general counsel at Vident where I oversaw their index provider proprietary ETF and ETF sub advisory business. I've also been a partner at Dechert and really have leveraged all of that experience to think about, what's the best way to provide legal services to asset managers? And I really leverage both my in-house legal expertise and my outside council legal expertise to try to customize the approach for providing legal services.

And so, for some managers, they need you to lean in a little bit more, and that's where we serve a little bit more as external general counsel and thinking through various product initiatives and thinking about the entirety of their business, how do they structure their business to build enterprise value? So we actually often advise clients on how to structure holding companies and memorialize joint ventures and strategic partnerships in order to maximize their economic interest and their enterprise value. So we really do advise asset managers on everything from soup to nuts, and I've always appreciated being able to bring that hybrid experience of both being in-house at large institutional asset managers as well as being outside council to both very established managers and emerging managers and managers that are really bringing cutting edge strategies to market.

Douglas Yones:

For you personally, Aisha, you've made some pretty big career decisions, you've been in exceptional roles at these big companies, well known in the industry, doing really well. What is it that prompted you to say, "Hey, I want to go do this next thing", or, "I'm going to go take this leap"? I mean, a lot of times outsiders, we look at those things and they feel risky, but did you feel like you were adding risk to your life at that time or was it something else that drove you?

Aisha Hunt:

Yeah. No, I never thought I was undertaking risk. I mean, even in launching my own firm, I feel like I've spent so many years helping asset managers really be successful, and so I felt if I brought that same energy to my firm, I really wasn't taking a risk because I have a track record of helping businesses be successful, and so certainly given how vested I am in my own business, Kelley Hunt & Charles, I really didn't think I was taking any risk, and I do think that it's important to really maintain your network and build your network, and it's really the relationships I've had that have led to the various iterations of my career. I really thought about, what teams do I want to work with? What friends in the industry do I want to work with? Who's doing the most exciting or innovative work in the industry? Or, to what extent are firms really trailblazing in terms of bringing innovation to the industry?

And so when you look at a law firm like Dechert, you're really at the forefront of everything that's happening in the 40 Act space, especially in the ETF space. And so I've known folks at Dechert from the beginning of my career, so a lot of those folks have known me for well over a couple of decades, and so when I decided to become a partner at Dechert, I just reached out to friends I knew at Dechert and they said, "of course, Aisha, we've known you forever and we really admire what you're doing and let's talk."

And so really it was driven by relationships I've had. The same thing happened with ALPS, I knew Jeremy May and Lisa Mougin and others who had led ALPS for years, and I was outside counsel to ALPS and was talking to Jeremy May one day and just started talking about the opportunity of joining ALPS as General Counsel. So I'd say I think that throughline has really been making sure that I manage my network very proactively and continue to build on relationships and friendships and really keep my ear to the ground with respect to opportunities that are fit for my career and just my journey in the industry.

Douglas Yones:

Was there ever this aha moment for you where you said to yourself, "You know what? I want to focus my career around ETFs"?

Aisha Hunt:

I think, I didn't necessarily have an aha moment. I think just the demand for ETF legal services drove me to focus more heavily on ETFs and just the innovation in the industry. I mean, one of the things I most enjoy about having ETF clients is, we're constantly innovating. I mean, the mutual fund is an American invention, right? An ETF is really a hybrid of a mutual fund, and so the inception of these products is really driven by innovation, and so I think my interest and my expertise have really aligned with the evolution of innovation in the industry, and so I tend to be drawn toward areas that are growing, innovative, cutting edge, and right now, I think ETFs are really where that focus is, and I'm really excited about what I think is this next chapter.

So two days ago, the Vanguard patent expired on the ETF share class. I think that's really opening the doors to further innovation, not necessarily by managers availing themselves of potential exemptive relief that the SEC might grant, but I think a lot of managers along with their legal counselor are thinking about really this next chapter, the convergence of mutual funds and ETFs. So, how do you get the best of both worlds? And while it could potentially be based on leveraging the ETF share class exempt of relief, if it's granted, there are other more creative ideas that people are having with respect to product initiatives, to leverage the best of both worlds, the attributes of mutual funds and ETFs, and so that's an area that's really exciting for me, and I think that's what continues to drive my interest in the ETF space, just the pure innovation that's taking place.

Douglas Yones:

And I think for me, here we are, it's 2023, you've got 30 years of ETFs, we celebrated with SPY early this year, Rory did it in an early version, if you didn't listen in the very first podcast with ETF Central, where we talked a lot about that and we talked about how the ETF industry, even 30 years in, continues to grow and innovate, and you're bringing up a very good point that the expiration of that multi share class patent, in fact, if anyone listening in you want to learn more about that, you could go to our website, just go to homeofetfs.com, and under our webinars, you'll see just a few weeks ago we held a webinar here at the New York Stock Exchange focused entirely on multi share class ETFs, and if you're thinking about filing, please reach out to my team and me, we'd love to talk to you.

We're working with a lot of different asset managers around filing for multi share class ETFs, but you're so right. The level of innovation in this industry just continues to grow, but the level of complexity does as well, which is of course, I'm guessing, why you focus so much of your time on the legal side of things and why you were able to grow your own practice and be so successful. Was there a point in your time when you were growing up, when you said, "I want to grow up and be a lawyer?"

Aisha Hunt:

I actually did think that when I was probably in elementary school, I thought, "Oh, I'd love to be a lawyer", and I also thought I wanted to be a physicist, and so I had a divided interest, and I remember being a mathlete and really focusing on math and science, and ultimately, I attended UC Berkeley, and I remember at the time everyone said, "you wouldn't have a life if you started focusing on trying to become a physicist, you would really just probably end up teaching at the time", and so I ended up being admitted to the Haas School of Business at UC Berkeley, and really it's that business background that drove me into focusing on securities law when I attended Stanford Law School and ultimately started my career in Silicon Valley before Google was public, which is dating myself a bit, but it's really been that trajectory of focusing on business and then adding the interests of in securities laws.

And most 40 Act lawyers, they're not in law school thinking, "I want to become a 40 Act lawyer." Most law schools don't even offer 40 Act courses. You often start off as a corporate securities lawyer and somehow find yourself in the 40 Act, and so once you're in the 40 Act space, you realize how exciting it can be. I think a lot of folks aren't familiar with the practice until they are familiar with the practice. And so it's been quite exciting, and I think historically, a lot of people don't appreciate that the 40 Act practice wasn't an area that lawyers, really where there was a lot of opportunity until after the 401K legislation was passed in the 1970s, I mean, that's what really drove the investment in mutual funds and then ultimately the focus on ETFs when they were incepted. So really that's what's driven, I think, my generation. The interest was built on the backbone of really the expansion and growth of mutual funds due to 401K legislation adopted in the seventies, and then obviously with the inception of ETFs, it's really become quite an exciting space.

Douglas Yones:

And you bring up the, I don't know how to weave this perfectly Aisha, but you bring up a really important point about our industry, which is, ETFs have been carved out of various rules and regulation, and it really wasn't only until 6c-11 came about that there was really anything pointed, and education in this industry has been the same where most of us grow up learning something near ETFs and then we get pulled aside and then we start asking lots of questions.

I bring all this up because it's a big reason that if you're not aware, the New York Stock Exchange, we have now partnered with The ETF Institute, for those that want to increase their ETF education, that want certification, that want to dive deep in this industry and ultimately achieve a role in this industry, whether it's an advisor or others, go to ETF Central, you'll see there the ETF Institute tab, you can click on that, we now offer a certified ETF advisor designation, it's a FINRA designation. Me, myself, I actually took my test, I completed it, I passed, and I'm now a CETF as of this week. It's very exciting. So, again, reach out to us or go to ETF Central to learn more about how you can increase your personal education. Aisha, do you have best tips for success that you could share with our listeners?

Aisha Hunt:

Yeah, absolutely. I think it's really important to seek out not just mentors, but sponsors, people that will really invest in your career, that will go back for your career. That will really give you not just insights and advice, but folks that really can help you craft strategies for your career objectives and really can give you a broader picture of various options in areas of interest, and so I think everyone's very focused on mentorship, but I think it's important that people really have skin in the game in your career, and sometimes you have to be proactive, and that's based on not only staying in touch with folks, but reaching out and really inquiring what's top of mind of folks in your network, and I think part of building your network is, sometimes you need to take the time to take every meeting, that's really difficult to do in our day and age, but we have so many different ways that we can meet with folks now.

It's critical to take as many meetings as you can from folks in the industry and people that you're friends with and you've known over the years, and really... They say... In Silicon Valley they used to say, "If you ask for money, you'll get advice, and if you ask for advice, you'll get money or financing." I think it's really important to ask people for advice, ask what's top of mind for them.

I also think it's really important to, when you've built your network and you're maintaining your network, try to spend time with people in person as much as possible. The world's really opened back up since Covid, and I think it's critical for people to take the time to spend time in person if they can. I also think it's critical that when you do start to develop expertise, you don't suppress that expertise, that you don't play small, and that you really do try to develop a platform for thought leadership so that you can share your thoughts and insights and receive feedback on that, be very receptive to listening, receiving feedback on the way you're thinking about the world, and so I think it really is important to maintain a broad and deep network, to listen to that network, to get feedback from that network and ultimately to continue to build on your platform and ultimately be able to share thought leadership to continue to drive innovation in your space and hopefully to develop some leadership in that space to help influence innovation.

Douglas Yones:

Yeah, I think a great line I was told once that is a very good summation for the way I think about, as I've asked for people's help and also tried to help others, and it was something to the extent of, "as an individual, try and make yourself an investment and don't make yourself a bill", and I thought that was just the perfect way to say, how do you ultimately build these collegiate relationships that help one another by both investing in other people but allowing them to invest in you versus paying a bill by spending time with you? So take that for what it's worth. Aisha, you have provided legal counsel roles at large firms, boy, some very large firms and very small firms. Do you find differences depending on the council you're providing across size of company?

Aisha Hunt:

I mean, I think with smaller firms you have to be willing to put on every hat. I mean, that means, if someone needs administrative assistance, you have to be willing to roll up your sleeves and make it happen. If the CEO is traveling, you have to be willing to step in a role of leadership and help provide direction at a high level.

I think you have to be willing to do every role where there's a vacuum outside of your SME; that's critical in a small shop. I also think it's important in a small shop to really focus on the entire team and make sure everyone's on the same page and rowing in the same direction. With larger firms, sometimes you can focus a little bit more on just your lane and your SME and how do you build out that SME and provide resources to other SMEs in a way that is very organic and synergistic? And so I think it's really important and just assess the culture of the firm you're in, the needs, where are the vacuums? Where are the gaps? Where can you step up and really contribute and really overall be a valuable member of the team that helps drive the business objectives of the firm?

Douglas Yones:

If you were going to say this is the one thing people should know about being a lawyer in the ETF industry, what would that be?

Aisha Hunt:

To listen very carefully. They talk about having two ears in one mouth, take two ears and one mouth and really listening and talking, and in that proportion, I think that's critical. You really need to listen to all the details, material details and nuances. You need to really understand where asset managers are, where the C-suite of the asset management firm, and what they are thinking about. What's next for them? Even if they have a particular agenda or objectives, you need to be able to share with them options and variations and permutations of how they can achieve their objectives, and to the extent they're thinking about certain product initiatives, I think it's really important to bring your experience to the table and share options and variations for approaching different product initiatives. So I think that's really key. It's listening as a lawyer and then not being afraid to share your business insights, your industry insights.

I mean, I think one of the things our firm does very effectively is that we leverage our industry insights, we leverage our network of relationships with the various service providers, and one of the things I share with clients is that, launching a mutual fund or an ETF, it's a team effort and you need to understand that there is players involved in moving the ball forward, and I think it's really important that asset managers really understand all of the service provider functions, understand which service providers are offering best in class institutional services, and that they really assess what's the best fit for what they're trying to accomplish, and making sure that the relationships culturally are a fit, and from a business perspective, their synergy with respect to moving the ball for whatever the asset manager's trying to accomplish.

Douglas Yones:

So we talked a little bit about multi share class, we talked a lot about the growth of ETFs. Are there specific areas in our industry that you look towards the future and you say, "Hey, that's what I'm really excited about right now"?

Aisha Hunt:

Yeah, it's what I mentioned earlier. I don't know if really the Vanguard ETF share class relief is going to be the path for leveraging the best of both worlds with respect to mutual funds and ETFs, but at the end of the day, mutual funds have been around a lot longer, collectively have more assets, and so the ability to leverage scale and performance of existing mutual funds combined with the tax efficiencies of ETFs, I think that it's really where innovation is going is, yes, the Vanguard model is a model that could be very successful for other mutual fund managers, but are there other legal wrappers? Are there other structures? Are there ways to think through legal structures that achieve the benefits of both mutual fund and ETF attributes that aren't necessarily in line with exactly the Vanguard model?

And so, one of the things I try to do, and my partner Ryan Charles tries to do, is we're constantly working with managers to try to innovate and think, "okay, just because this path isn't working or the SEC's not comfortable with this path, how can you approach a variation of that path to achieve what I think...?" It will be really...

Ultimately, we will get there, the convergence of the attributes of mutual funds and ETFs, and I think there'll be further innovation so that at the end of the day, the focus is really on what makes sense for the end investor. What's the easiest way for the investor to access this investment strategy that meets their needs from a performance tax perspective? And so I think it's, how do you optimize optionality with respect to what investors want? And I think that's where we're headed. I think the Vanguard ETF share class expiration is just a launching pad, and I think there's so much more to come with respect to innovation and how to really optimize utilizing all of the best attributes of the various 40 Act products and looking at how to work with SEC staff to get there.

Douglas Yones:

So I know this is going to be a tough one for you, you've been involved in a lot of ETF launches. Do you have a favorite ETF? Whether maybe you helped launch it, or maybe you just love this ETF, I'll open the doors to anything for you.

Aisha Hunt:

Well, I'll tell you, I love every ETF that we've helped launch and every ETF asset manager that we've helped, so I don't want to pick a favorite, but I will tell you there is an ETF that we really enjoyed launching and really like the theme that the ETF is leveraging more recently, it was nominated by etf.com, as ETF of the year, and it didn't win the award, but it was nominated and I think it was nominated because of what the theme really represents, and that's CHRG, C-H-R-G is a ticker, and the team at EMG Advisors, great team, smart team, they really are trying to democratize institutional trades.

In particular, CHRG focuses on providing investors with access to exposure to lithium, copper, the elements of EV batteries, and so the value proposition there is that you can either invest in Tesla or you can invest in an ETF that is really giving you exposure to the elements of an EV battery, and I think those types of themes continue to be of interest to retail and institutional investors, and I'm really excited about really the retailization of trades that you would have to have 20 million in collateral at Goldman Sachs, have access to a lithium's futures contract, now you can go out and potentially invest in CHRG or similar ETF, and so I'm really excited about those types of themes and I'm really proud of that fund launch and the future growth trajectory of the fund.

Douglas Yones:

And as a reminder, you could go learn a lot about CHRG on etfcentral.com. We built that website so that investors and advisors didn't have to know exact ticker symbols, didn't have to know exact names of funds, you can just type in roughly what you're looking for. So CHRG will come up in a lot of different ways, even if you don't know C-H-R-G, and we're pretty excited as well, a big innovator in that fund and in its strategy. Aisha, you talk to a lot of people, and you're heavily connected to the industry, but there are probably people listening in who maybe don't know you and haven't spoken with you in the past, how should an advisor or a new asset manager that's thinking about coming into this space, how do they talk to you? How do they reach out to you and your team?

Aisha Hunt:

So we recently rebranded with Ryan Charles, my partner, joining the firm. So before the firm it was Kelley Hunt, now it's Kelley Hunt & Charles. In connection with the rebranding, we decided to do something a little innovative, probably not of interest to non-lawyers, but we're one of the first law firms to use the domain .law. So our website is khc.law, that's khc.law based on our firm name, Kelley Hunt & Charles, and so what we try to do on the firm's website really provides insights, thought leadership, and so we have featured news and insights that include podcasts like this where we're sharing insights, thought leadership, and really helping folks think through, how do you navigate a new product initiative? In particular, how do you navigate an ETF initiative? And what are your options right now with respect to getting into the ETF space? So I think our website tries to not just share information about our firm, but really share insights about how to think through your options in terms of moving into the ETF space or with respect to product rationalization of your existing ETF family.

Douglas Yones:

Now that is a wrap on this edition of ETF Central's The Podcast. As a reminder, if you're looking to invest in yourself and your ETF education, please make sure to visit etfcentral.com. As I mentioned, under the ETF Institute banner, you can find out about that certified ETF advisor designation that I got this week, and you can begin the work you need to become a CETF. Thank you Aisha for being here to share your insights and really sharing a lot about a different side of the industry that maybe those on the outside don't get to experience, but frankly can be a lot of fun and can challenge our brain quite often, which always makes things a little bit more fun at work. I want to remind everyone to stay tuned for upcoming episodes featuring thought leaders from across the ETF ecosystem. I'm Douglas Yones, host of today's podcast and head of Exchange Traded Funds at the New York Stock Exchange, the Home of ETFs