Q&A with Jerry A. Warren

Q: We’ve recently reported on two local investment businesses that are planning to launch exchange-traded funds — The Oklahoma Fund and FaithShares. What do you think has sparked these local efforts in the ETF arena?

A: Exchange-traded funds combine the best aspects of a mutual fund with the benefits of owning stock. Like a mutual fund, an ETF permits a person to invest in a large number of companies through a single investment. Unlike mutual funds, the ownership interest in an ETF is a share of stock, which is freely tradable, liquid, and does not result in year-end distributions of taxable capital gains. The benefits provided by ETFs caused an explosion in the number and types of ETFs available in the market. As the number of ETFs increased, the investment focus of newer ETFs became more specialized. The sponsors of The Oklahoma Fund and FaithShares correctly recognized that certain investor demands were not being met through existing ETFs; that is, the ability to invest in a bundle of Oklahoma-based companies or companies approved by the boards of many of this country’s major Christian denominations. In true Oklahoma entrepreneurial spirit, the sponsors of these ETFs took action to meet investor needs, both within the state and across the country.

Q: As someone who has worked on both those efforts, do you expect more Oklahoma businesses will try to enter this field?

A: It’s very likely. While the hurdles to create an ETF remain relatively high, they are being lowered as the number of ETFs increase. The key for any sponsor of an ETF is to find an investment model that excites the market.

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