Crain's Detroit Business

Detroit’s only ETF firm tackles growing business far from Wall Street — with a UM twist

By Kurt Nagl | Sep 15, 2019

Detroit-based Exponential ETFs — the only exchange-traded fund issuer in the state — is out to prove it can compete with the heavy hitters of Wall Street.

After moving from Ann Arbor to downtown Detroit in April, the firm is growing its staff and looking to expand from $470 million in assets under management to $1 billion in the next year, said CEO Phil Bak. Its flagship fund, based on the American Customer Satisfaction Index, is also picking up steam, although it has yet to prove it can outperform the market. Businessman and ACSI mastermind Claes Fornell, who is bankrolling the enterprise, has $50 million that says it will.

Since ETFs were first made available in the early 1990s, more than 5,000 have been developed. The largest ETF manager is BlackRock, which has more than $1.3 trillion in assets under management across several funds.

ETF funds are composed of dozens of different securities, including stocks, bonds and commodities, that track underlying indexes. The ACSI is designed to favor companies that get good reviews from customers.

“Basically, let’s take all the companies that are getting a five-star rating on Amazon and overweight those companies,” explained Sam Huszczo, owner of Southfield-based SGH Wealth Management, which handles $160 million in assets that are mostly invested in ETFs.

Huszczo, an eager but cautious adopter of ETFs, said he is not an investor in Exponential’s products. He said as a rule he sticks to funds that have been around for many years — long enough to prove they track an index as designed. Thematic ETFs are grabbing the attention of investors, but many are little more than flavors of the month, he said. For example, esports and marijuana ETFs are exploding in popularity.