Market Overview

Goldman Yanks A Bunch Of Cash From Its Socially Responsible ETF

Goldman Yanks A Bunch Of Cash From Its Socially Responsible ETF

An increasingly popular strategy in the world of exchange traded funds is for issuers to seed their new ETFs with internal capital. In the ETF space, size often begets size, so the strategy can prove effective in luring other investors to the fund.

That doesn't mean the issuer's capital stays in its ETFs forever. Just ask Goldman Sachs Group Inc. (NYSE: GS).

What Happened

The Goldman Sachs JUST U.S. Large Cap Equity ETF (NYSE: JUST), which debuted last June, is significantly lighter in the assets under management these days after Goldman pulled nearly $102 million from JUST when it became apparent the socially responsible fund could remain above the coveted $100 million in assets under management level without Goldman's seed capital.

“Goldman Sachs has pulled its seed capital from the Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST), slashing the fund’s assets under management by nearly half,” The Wall Street Journal reports, citing sources close to the matter.

Why It's Important

As of March 8, JUST had $109.57 million in assets under management, according to Goldman data. Data indicate $101.87 million departed the fund for the week ended March 8. Those outflows expanded JUST's year-to-date departures to $105.67 million.

JUST follows the JUST U.S. Large Cap Diversified Index. That index “provides market cap-weighted exposure to companies with above-average JUST scores based on the most recent rankings within each industry group; sector neutrality may contribute to a low tracking error,” according to Goldman Sachs Asset Management.

When JUST debuted last June, it had what was at the time the best first day ever for a socially responsible ETF, hauling in $250 million in assets. That crown now belongs to the Xtrackers MSCI USA ESG Leaders Equity ETF (NYSE: USSG), which hauled in $846 million on its first day of trading last week.

What's Next

Departures from JUST do not need to be viewed in a negative light. One way of looking at the outflows is that Goldman is hinting the fund is viable on its own. Year to date, JUST is up 10 percent, indicating its primary challenge may be beating broader benchmarks, such as the S&P 500.

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