Goldman Sachs Finds Blueprint For ETF Success

In a year where over 200 new exchange-traded products have debuted in the United States, it is actually fairly easy to identify some of the most successful rookie ETFs. That task is rather simple when using asset-gathering proficiency as the primary metric in judging a new ETF's success.

When it comes to new ETFs off to stellar starts, Goldman Sachs Group Inc GS, itself a late entrant to the ETF business, has a trio of such funds. However, one of Goldman's ETFs, the Goldman Sachs ActiveBeta Emerging Markets Equity ETF GEM, is on a torrid asset-gathering pace.

The asset-gathering pace set by GEM is impressive for at least two reasons. First, GEM is still not 90 days old. The ETF's three-month anniversary is Christmas Day. Second, GEM is packing on assets at a time when many investors are scurrying out of emerging markets stocks and ETFs.

Related Link: Goldman Sachs Heads To Emerging Markets With New ETF

GEM: A Diamond In The Rough?

Simply put, GEM's growth trajectory is astounding. GEM had $20 million in assets under management, only to see that total rise above $178 million by October 6. When Benzinga last highlighted GEM on November 6, the ETF had over $185 million in assets under management.

And now, thanks to a big commitment from an unidentified institutional investor, GEM now has over $500 million in assets. To be precise, as of December 15, GEM was home to $545.2 million, making it the third largest new ETF to debut in 2015.

The Fund, The Index And A Peer

GEM takes the stocks found in the widely followed MSCI Emerging Markets Index and weights them based on low volatility, momentum, high quality and good value. That is the same strategy employed by the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF GSLC.

GSLC is Goldman's first ETF, having launched 90 days ago. All GSLC has done in those three months is pack on $224.5 million in assets under management. GSLC was also named one of the two best new ETFs of the year by Morningstar.

Goldman appears to have learned an important lesson: If a company is going to be late to the ETF game, its products better separate themselves from established rivals, do so quickly and costs are a good place to start. GEM charges 0.45 percent per year, which is reasonable among strategic beta emerging markets ETFs.

On a related note, GSLC, Goldman's U.S.-focused offering, charges a paltry, Vanguard-esque 0.09 percent per year. In fact, GSLC sports the same expense ratio as the Vanguard Value ETF VTV. The average expense ratio for ETFs in the Morningstar U.S. ETF Large Blend Strategic Beta category is 0.38 percent per year, and the average annual fee for funds in the Morningstar U.S. ETF Large Blend Index group is 0.36 percent, according to Goldman.