ETF Minds: Conor MacWilliams Talks Innovation, Challenges, and What Comes Next

Conor MacWilliams, owner of Outer Beach Consultants and a seasoned product specialist with deep expertise in index construction, ETF development, and market infrastructure — believes the ETF boom is far from over.

In this latest edition of ETF Minds, he breaks down why the industry still has space to grow, what frustrates him most about today’s market, and where the next big opportunities might be hiding.

Is the ETF industry getting too crowded?

I think the real answer is no.

There has recently been quite a lot of press around there being more ETFs than equities in the US markets and how many new issuers entering the space.

As someone who cooks reasonably well, there are always more recipes than there are ingredients.

I think as the price to launch and run an ETF, particularly in equities, continues to drop we’ll see more launches and more companies entering via white label or running their own trusts.

What’s still out there waiting to be “ETF’d”?

Quite a lot.

I’ll ignore the multitude of memecoin and leveraged products being launched right now and focus on more “traditional” portfolio pieces.

I think we’re finally starting to see some active equity strategies coming over from both the hedge fund world and the mutual fund world that can hopefully stand the test of transparency and intraday liquidity over a longer period.

Tom Lee from Fundstrat is a great example.

His Fundstrat Granny Shots U.S. Large Cap ETF (GRNY) has taken in AUM quickly and his strategy is currently doubling the return of the 500 year-to-date. Perhaps he’ll be able to keep ahead as the product matures.

I also see a lot of room for multi-asset structure to evolve.

With an amenable SEC and CFTC right now, my guess is we’ll see some target date-esque products with some private market exposure launch.

I also think there are commodities and alternative products, some in pipeline, that will find places in both retail accounts and model portfolios.

Are we going to see more ETF closures and consolidation?

Yes. I think there is a lot of throwing of spaghetti against the wall going on right now, particularly in the leveraged, memecoin, and crypto spaces, that won’t last.

I think there are some equity products that are particularly expensive for the expense ratios that they charge.

For consolidation, I wouldn’t be surprised to see sort of a PE-like rollup of a number of smaller issuers over the next few years. I don’t like that business model and think it would be a negative for the overall ecosystem.

What’s your take on the active ETF rush?

I think the long migration of mutual funds to ETFs is still in progress and there are quite a few equity portfolio managers that think they can handle the daily liquidity and transparency requirements of an ETF.

My guess is that we’ll continue to see the percentage of active managers beating their benchmark in the ETF industry grow until we get to where mutual funds are currently.

I think credit is where active management can shine the most.

There are a number of products like Janus Henderson Mortgage-Backed Securities ETF (JMBS), PIMCO Active Bond Exchange-Traded Fund (BOND), and Dimensional Core Fixed Income ETF (DFCF) that take advantage of having a fabulous research team and execution facilities.

Bonds are much more complicated and a “buy the market” passive approach or even a more formulaic metric centric approach almost always underperform a smart actively managed portfolio.

What bugs you most about the industry right now?

What bugs me the most is that I think there are two different types of ETF issuers now.

There are plenty of issuers that create, test, and launch investor-centric products that do exactly what’s on the tin without any smoke and mirrors or marketing puffery.

However, there are also issuers who seem to be in the business of rent-seeking.

They provide expensive or misleadingly marketed products that are bad from both a total return perspective and from an industry-confidence one.

These issuers don’t add anything to the ETF ecosystem and the way they portray their products can give a negative first impression.

As an example, I speak with and help educate a lot of folks in the US and Europe about ETFs.

For many of them in Europe, they don’t know what an ETF is. They don’t know about investment beyond having a pension they’ve never looked at.

If the first thing they see is an advertisement on Reddit, X, or other social media platform for a product promising the moon via leveraged exposures or income, it makes my job as an ETF evangelist just that much harder.

I should note I have no issue with leveraged products or risky investments at all. If you understand the risks and want to invest, go for it.

What’s your best advice for new issuers trying to break in?

For everyone’s reference, I consult on ETF products, so I am sometimes the first outsider to see a product that a potential issuer has created. In my experience the feedback that clients need encompasses the following statements and questions: There is no free lunch.

ETFs are not a magic bullet.

You should charge less. Is this good for investors or for you? Do you have distribution?

Further advice, white label servicers tend to subdivide in the same way that ETF issuers do.

There are some absolutely fantastic providers that I actively send business to if I can and there are others where I’ve seen market budgets balloon and expense ratios grow without rhyme or reason.

Be sure to fully vet your contracts.

Which ETF theme do you think has the brightest future?

I’m a passive nerd so I will always say that passive indexed approaches will behave the best over the long term. I tend to favor picks and shovels, right now that would be in power generation and distribution via utilities among others to support the AI sector growth.

If you could launch any ETF today, what would it look like?

I have created some hilariously bad ETF ideas but one takes the cake. I call it the Captain Ron Rico Chaos Navigation Fund (Ticker: AHOY or RICO).

It's a passive managed fund tracking an index with the following methodology:

Companies must have:

1. Must have a CEO with no formal business training
2. Has to have survived at least one bankruptcy (near-death) 
3. Must be domiciled in a tropical tax haven.
4. Must have changed their core business model more than twice since founding. 

The funds annual reports would be chock full of bad nautical references and the issuer logo would be a one-eyed pirate that looks like Kurt Russell but not enough to get me sued.

Do you have a favorite ETF? Why that one?

This is a pretty loaded question for me. I’ve consulted on number that I can’t mention and managed the indices for thousands more.

My answer is SPDR® SSGA IG Public & Private Credit ETF (PRIV).

Anyone who reads my Substack will probably be laughing right now.

I write about PRIV every week and while I would never claim to like it, it is my favorite to analyze. It contains the only public-facing pricing information for private credit in an ETF.

What’s your top tip for young ETF investors just starting out?

If you aren’t a financial professional, the K.I.S.S. system is your best friend. Keep. It. Simple. Stupid. You don’t need dividends, you don’t need income, you don’t need anything with an expense ratio above 10bps.

Don’t check your holdings every day. You aren’t smart enough to be an active manager. If you want to express your opinion, tweet about it. Read some Bogle.

About Conor MacWilliams

Conor MacWilliams is a seasoned product specialist and consultant with deep expertise in index construction, ETF development, and financial market infrastructure. As owner of Outer Beach Consultants, Conor partners with index and ETF providers to analyze and optimize product offerings, develop new strategies, and evaluate market positioning through data-driven insights and industry expertise.

Conor served as Senior Index Manager at S&P Global Dow Jones Indices managing high-profile equity and multi-asset global indices. His work spanned the full spectrum of index operations, from day-to-day calculations and corporate action implementations to strategic rebalancing and committee-based decision making.

Earlier in his career at Vista Index Services, Conor pioneered index products for the mortgage credit risk transfer. His background also includes credit derivatives and fixed income markets which gives him a unique perspective on cross-asset index construction and risk management.

Conor holds a Bachelor of Science in Leadership and Management from New York University and is based in Brewster, Massachusetts.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.