Monika Calay: Welcome to Morningstar. I’m Monika Calay, director of Manager Research for the UK, and I’m joined today by Dorcas Phillips, head of capital markets for Robeco.
Dorcas, thanks for joining us. We are celebrating International Women’s Day, and you have been named one of Morningstar’s 25 ETF leaders in 2025. I’m thrilled that you’re here to join us for this conversation. I wanted to kick off with the capital markets function, because it is so unique to ETFs. So could you walk us through capital markets and how it’s evolved over the span of your career?
Dorcas Phillips: Perfect, I will do. Thank you very much, Monika, and it’s great to be here. In terms of the capital markets function itself, I think the easiest way to explain it is that it’s the piece that connects the internal and the external part of the ETF ecosystem. So what do I mean by that? The internal piece is obviously where the fund management happens. And the external piece is where the exchange traded fund actually is interacted with by end clients. So the capital markets function is really there to ensure that there’s efficiency and process between the internal and external part of the ecosystem.
And in terms of your question around how things have evolved. I’ve been fortunate enough to be involved in ETFs for over 20 years. So you can imagine over that time, quite a lot has actually changed. If we go back to 20 years ago, I was on the sell side, actually, for Morgan Stanley, where I supported the trading desk of the ETF desk, supporting a lot of the ETF issuers at that time.
And some of the challenges we faced are challenges that right now we say just really vanilla, really vanilla circumstances such as dealing with emerging market equity products, and how do we ensure that we can effectively price those for our end clients? Over that period of time, as you know, the whole industry has completely changed. And there’s been lots of innovation that’s happened along the way. We obviously have physical ETFs, synthetic ETFs, and how they obviously operate means that there’s different capital markets considerations. We also have this wonderful breadth of different exposures that are accessible via the ETF wrapper, both in terms of asset class and in the way you can actually access a particular exposure. So equity, fixed income, commodities, and quite recently, obviously, we’ve had crypto and active ETFs now being kind of the headline and what’s kind of capturing everyone’s attention.
So the capital markets function has definitely had to evolve as it’s had to really kind of keep up to date with ensuring that efficiency of pricing and end investors can ensure that they have a good experience when accessing the ETF, regardless of what the underlying exposure is.
Calay: So you’ve mentioned all the different types of products that have come into the market, including active ETFs. From an operational standpoint, is there a difference in the way that the capital market function works from a passive standpoint or an active standpoint?
Phillips: Well, interestingly, fundamentally, as of today, it’s the same. In terms of regulatory requirements it means that we have to be transparent around our holdings. We have to disclose our holdings to the marketplace before the market open. And that allows the liquidity providers, the market makers, the authorized participants, to ensure efficient pricing on screen, and also ensuring that when an investor is looking to gain access, regardless of the underlying exposure, that they can get a price that’s reflective of the particular exposure that they are looking to gain access to. So fundamentally, operationally, it’s the same.
However, one of the key differences is there’s a real need to ensure that your authorized participants and your market makers, the liquidity providers, really understand what the strategy is. Obviously an index or a passive ETF, there’s a rules-based methodology that the market maker can really understand to ensure that they can either hedge and price effectively. With an active ETF, there isn’t a natural index, maybe an index that isn’t directly exposed to that active exposure. So that’s definitely an area of consideration.
And then obviously the regulatory, the environment I’m sure will change. So the answer to this question maybe in two years time will be completely different. There was headlines yesterday around semi-transparent ETFs. And we know through you’re looking at what happens in the US, you know, fully transparent ETFs, kind of much more highly concentrated funds will potentially come in to market. And I think at that time there will be a need for the ecosystem to change and evolve. And certainly that will have consequences for the capital markets function.
Calay: Absolutely. And in terms of launching ETFs, so Robeco has launched a number of active ETFs recently. Can you walk us through what it takes to launch a successful product?
Phillips: Yeah, I think it’s a really good question because, you know, every week there’s news of an asset manager coming to the ETF market. So it’s becoming a place where you have to really understand what is it that I’m bringing to the market and how do I stand out, versus the 3,000 other ETFs that investors can access. So looking at it from a Robeco perspective, we’ve really look to leverage our existing capabilities, and leveraging our quant and enhanced index capabilities, which we’re really well known for. We’re very well established, 20+ years of experience within that space. So within the ETF wrapper, what we’re doing is just giving a different flavor of what we do currently for our clients and what they already know us for. But offering the benefit of accessing that via the ETF wrapper. So understanding where you fit and what solution you’re looking to provide to a client, I think is really, really critical.
And second to that, it goes without saying that it’s not easy to bring a new ETF to market. So you need to have commitment from top down and across the organization, to ensure that you can be as successful as possible. And that means having the distribution support, marketing support, as well as senior level report to really kind of ensure that you have support on that journey. Because, you know, once you’re in that space, you need to be committed. And certainly, again, you’re thinking about it through my Robeco lens, we’ve launched our first products, as you mentioned, at the end of last year, but we have a large product roadmap. And we’ll be bringing more products to market. And that obviously needs, you know, as much broader support enabled to be successful.
Calay: So you’ve walked us through what it takes to launch a successful product. But how about folks that want to enter this industry? It’s an exciting industry to be in. And, given your experience as a as a leader in this space, what advice do you have for young folk looking to enter?
Phillips: Well, first of all, I’d say do it. So, you know, people who know me would know that my one of my favorite sayings is ‘there’s never a dull moment in ETFs’. And I think that’s true. And I’ve been saying it for 20 years. There’s constantly innovation, there’s constantly change happening. And we’ve talked about the opportunity to access different asset classes. We’ve talked about passive to active. There’s so much to learn. So my advice would be, you know, really kind of understand which part of the asset management or ETF industry you want to be involved in.
If we just look at capital markets, for example, the individuals across the industry who are in the capital markets function, if you were to deep dive into their careers, there isn’t a straight path into capital markets. Like my example from sell side to buy side, you have examples of individuals coming from trading to capital markets, you have individuals coming from distribution to investment directing within the ETF function. So the opportunities are endless.
So my advice would be say yes to every opportunity. Use the networks that are available to really kind of learn and understand a little bit more around the different roles because, you know, we can sit alongside colleagues and don’t know what the person sitting next to us actually does. So I think it’s really important to really kind of explore, say yes, use that opportunity to, you know, learn a little bit more and get involved. I think it’s just going to constantly change as well so new opportunities are coming up.
Calay: Absolutely. Thank you so much, Dorcas. That was fantastic. I’m Monika Calay for Morningstar. Thanks for listening.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
