xETFs
Frequently Asked Questions
At xETFs, we understand that navigating the world of asset management can raise many questions. Our FAQ section is designed to provide you with clear and concise answers to the most common inquiries. Whether you're curious about our xETF products, the securitization process, or investment strategies, we aim to equip you with the information you need to make informed decisions. Explore our frequently asked questions to gain insights and clarity on your financial journey with us.
What is a XETF?
A XETF is an exchange traded product (in the form of a note) that provides a solution for investment management and distribution. The XETF’s price is linked to the value of the underlying assets or Portfolio.
Who are the participants of the XETF Programme?
The main participants of the program are: The Paying Agent, The Issue Agent, The Trustee, The Auditor, The Arranger and The Issuer.
Who issues the XETF?
The Issuer is a PCC company incorporated in Guernsey under the legal form of a Protected Cell Company (PCC) dedicated to securitization of different investments.
Is there Issuer risk on the XETFs?
The characteristics of the Issuer as an orphan SPV ensures that there is no Issuer risk related to actions by the Issuer or any of its shareholders. Furthermore, all underlying assets of all XETFs and any rights and benefits resulting from them are secured to the Trustee for the benefit of Noteholders (investors).
Who can issue a XETF?
A XETF Series is issued by the program's Issuer (The PCC Company) at the request of an investment advisor, developer or project manager as the named Portfolio Manager. The Portfolio Manager has full control of the investment strategy, though for legal purposes has no issuer related liability. We can arrange a XETF issuance for many kinds of investment professionals, such as registered investment advisors, portfolio managers, broker/dealers, family offices, and other money and asset managers.
How long does it take to issue a XETF?
The timing to complete an issuance is around 2-4 weeks for the XETF Fund and about 4/6 weeks for the XETF Wrapper and Loan. Issuance timing is dependent on a timely completion of the initial term sheet by the Portfolio Manager.
How long does it take to issue more notes?
It takes about 8 business days to issue an additional tranche on an existing XETF Series.
Who manages the strategy behind the XETF?
An appointed Portfolio Manager manages the XETF strategy. The investment strategy is defined on the Issuance documents according to the Portfolio Manager’s direction. Also, the Portfolio Manager may establish the terms for their Management fee, which will be disclosed in the Issuance Documentation.
How can issuing a XETF earn an advisor more revenue?
Administration costs inherent in managing investment portfolios average just less than one percent of assets under management, exclusive of management fees. By utilizing a XETF as an investment management vehicle the Manager can reduce these administrative costs by as much as forty percent or more with the savings being passed through to the client or retained by the advisor in the form of an increased management fee. In addition, the XETF's distribution advantages and efficient administration allow managers to focus on growing their assets under management.
How much does it cost to establish a XETF?
The cost to establish a XETF is very competitive and designed to allow for low risk launch and inexpensive maintenance. Final costs depend upon several factors, including, among other things, the types of underlying assets and the issue size.
How is portfolio management with a XETF superior to an LLC or partnership?
For a manager, the XETF Program provides complete administration services by some of the most well known and top tier financial institutions in the world, allowing the Manager to concentrate entirely on managing assets and growing the size of their portfolio. Furthermore, Investors in partnerships and limited liability companies are required, in most jurisdictions, to realize capital gains and losses in the year of the transaction. However, when the investor invests in the managed portfolio through a XETF the investor will not realize a taxable event until the note is sold or redeemed.
How can investors buy a XETF?
All XETF are registered with Euroclear or Clearstream and are assigned a unique ISIN/CUSIP number, permitting the investors to purchase the note directly through their existing brokerage account.
Where is the XETF listed and who clears it?
XETFs are listed in the Vienna Stock Exchange (or other Stock Exchange depending on the project) and it is cleared through Euroclear.
What are the common Custody Platforms to operate the strategy of a XETF Fund?
For the XETF Fun, the Custody Accounts can be opened in Interactive Brokers and Sparkasse. Portfolio Managers can invest directly through these platforms.
Who can purchase a XETF?
XETF Notes may be subject to selling restrictions in several jurisdictions. In the United States, the notes fall under Regulation S and cannot be purchased by U.S. persons. Some restrictions apply to investors in the European Union in accordance with the prospectus directive regulation.
XETFs are a Regulation S security, what does this mean?
XETFs have been designed for non U.S. investors. In the United States, they are considered a Reg S security and therefore are subject to special restrictions. We recommend you consult with your legal counsel regarding the Reg S restrictions and always before making any investment decisions.
Why would a U.S. advisor issue a XETF for a non US investors?
XETFs are listed with a registered depository such as Euroclear or Clearstream, therefore, a note can be purchased by non U.S. Investors worldwide, significantly easing the flow of foreign capital into U.S. projects; meaning foreign investors can invest in a U.S. project or a U.S. money manager’s strategy quickly and directly through their existing brokerage account.
What is the average minimum investment in a XETF?
The minimum investment in the XETF Program can be as low as $100,000, depending on the structure of the Portfolio and assets under management.
Can an investor cash out their XETF at any time?
The XETF is an instrument designed for long term investment, while some tranches have a fixed maturity date, the ability to liquidate notes before maturity will depend upon market demand and liquidity.
What happens to the portfolio once a XETF Series matures?
Once the XETF Series matures, the Portfolio Manager will execute the final investment decisions in accordance with the Issuance documentation. Noteholders will receive their capital back and any accrued returns will be transferred to the noteholder account.
What happens if a Portfolio Manager wants to change their investment strategy?
The investment strategy of the Portfolio can be changed within the scope of the issuer guidelines and as long as it is disclosed in the prospectus documentation.
How does the XETF handle tax implications for investors?
Tax treatment depends upon the country of the investor’s domicile and tax law governing investment funds in their jurisdiction. It is advisable to consult with tax advisors and/or legal counsel.
Are there any advantages to using a XETF instead of a traditional fund?
XETFs offer flexibility, transparency, lower management fees, easier compliance, and operational efficiencies compared to traditional funds. This could enhance returns and ultimately provide better investment outcomes for the investor.
What types of strategies are available through XETFs?
There are various investment strategies, including equity, fixed income, commodities, currencies, and real estate. Portfolio Managers can customize their strategies based on their clients' needs.
What reporting does the investor receive from a XETF?
Investors receive periodic reports, including financial statements and performance summaries, through their brokerage accounts. In addition, Portfolio Managers may provide tailored reports on request.
How does XETF address compliance issues?
The XETF program is structured to comply with regulations and laws in relevant jurisdictions. The Issuer ensures compliance, while Portfolio Managers are expected to adhere to best practices in investment management.
What are the liquidity options for a XETF?
Liquidity options depend on market conditions and demand for specific tranches of notes. Some notes may be more liquid than others, depending on the underlying assets.
Are there any ongoing fees for a XETF?
Yes, there may be ongoing fees such as management fees, administrative fees, and performance fees, which should be outlined in the Issuance documentation and discussed with the Portfolio Manager.
How can XETFs enhance investor returns?
XETFs are designed to lower costs and increase access to various investment opportunities, potentially leading to better returns for investors through optimized management and operational efficiencies.
Can a XETF be customized for specific investment objectives?
Yes, Portfolio Managers can tailor XETFs to align with specific investment objectives or strategies, provided that they remain compliant with the guidelines set forth by the Issuer.