Managing the ETF lifecycle at scale

As ETFs continue to gain momentum across global markets, managing them efficiently has become increasingly complex.

In this discussion, Steve Milanowycz and Raghav Malhotra unpack the forces driving ETF growth and the operational, technological, and strategic considerations required to scale successfully.

Steve Milanowycz

Head of Product Strategy
Charles River Development

How would you characterize the current state of the global ETF marketplace?

Steve: ETF’s are one of the more dynamic products in capital markets. As of February 2026, there are over 16,000 exchange-traded funds (ETFs) available globally, with 31,500 listings across 84 exchanges. Global assets under management (AUM) reached a record $21.24 trillion. While there are nearly 1000 providers worldwide, the top three (iShares, Vanguard, and State Street) manage nearly 60% of all global ETF assets.

ETFs are dominated by equity investments followed by fixed income. We’re also seeing growing interest in actively managed offerings, commodities, crypto currencies and multi-asset strategies. 2025 was no different than previous years in the sense that the market keeps growing. Year over year, flows are at $2.4 trillion.

What’s driving that growth?

Raghav: ETFs are quickly becoming the default vehicle for investment managers looking to launch new products and introduce their capabilities to the market. Practically any investment thesis or desired exposure can be packaged as an ETF. Unlike mutual funds, ETFs offer investors intra-day liquidity much like equities.

In December 2025, the SEC authorized dual share classes, enabling ETFs to exist as a share class within existing mutual funds. This provides investors with liquidity, tax efficiency and a single track record. The SEC has issued notices of intent to approve this structure for at least 30 ETF managers.

ETFs are dominated by equity investments followed by fixed income. We’re also seeing growing interest in actively managed offerings, commodities, crypto currencies and multi-asset strategies.

How are ETFs managed from an operational standpoint?

Steve: ETF’s are operationally complex. The creation and redemption process for ETFs takes place in the primary market and is facilitated by authorized participants (APs), US-registered, self-clearing broker dealers who regulate the supply of ETF shares in the secondary market where retail and institutional traders buy and sell.

Creation involves APs introducing additional shares to the secondary market. During this process, APs deliver the underlying securities to the fund sponsor in return for ETF shares. For redemptions, APs deliver ETF shares to the fund sponsor in return for the underlying securities. These transactions are executed in large increments known as unit sizes, which vary from 10,000 to 600,000 shares.

APs can create or redeem ETF shares to take advantage of arbitrage opportunities in the market. This incentive keeps the ETF market price in line with the value of its underlying securities and injects intraday liquidity for secondary market participants.

What challenges do investment firms face in launching and managing ETFs?

Raghav: Managing ETFs at scale requires institutional expertise, solid partnerships with trusted servicing providers, and fit-for-purpose technology platforms that support the operational complexity of these securities, especially on peak trading days.

Early on, mutual fund providers retrofitted existing workflows and systems to support their ETF offerings. While ETFs may look like mutual funds, they are significantly different from an operational perspective, given the mechanics of the daily create/redeem process and associated fund flows. Unfortunately for many firms, visibility into primary market activity is still missing from their construction tools.

Multiple systems and applications are required to make this process work. Basket construction, production, and connectivity to order taking platforms are often fragmented, while the servicing component might entail relationships with multiple providers. That lack of cohesion between disparate systems and service providers compounds process inefficiencies.

What additional challenges do actively managed ETF’s present?

Steve: Actively managed ETFs have grown quite significantly to over one trillion dollars in AUM. We’re seeing increasing numbers of clients look to bring active strategies to market packaged as an ETF, especially in fixed income. Actively managed ETFs inject additional complexity involving negotiated baskets of securities, and spreadsheets are not a scalable solution. As transaction volumes grow, manual processing reaches a breaking point, injecting operational risk and costly inefficiencies.

APs can create or redeem ETF shares to take advantage of arbitrage opportunities in the market. This incentive keeps the ETF market price in line with the value of its underlying securities and injects intraday liquidity for secondary market participants.

What challenges does Charles River technology solve for ETF managers?

Raghav: We took a bottom-up approach in designing our solution, spending time with clients to understand existing processes and how they could be automated, as well as the myriad operational complexities clients encountered as they bring new ETFs to market. Our strategy rests on four foundational pillars.

First, we focused on creating purpose-built workflows for ETF managers. The idea was to reduce the “swivel chair effect” where portfolio managers must deal with multiple screens and systems to figure out what’s happening in the primary market while they’re managing fund inflows and rebalancing in other tools.

Secondly, we had to provide primary market visibility. The ETF book building process happens daily. Authorized participants will send requests to create or redeem shares depending upon what’s happening in the secondary market. It was imperative that we bring that visibility right into the construction tool, providing real‑time transparency into ETF activity across standard, custom, and negotiated baskets. This enables stronger oversight, faster issue resolution, and improved control across the ETF lifecycle.

Third, we had to remove the non-value added steps from the process by focusing on automation and scale. We built a number of one-click integrations to streamline the ETF lifecycle, taking friction out of the process and enabling fund managers to focus on value added activities instead of mechanical processes. By enabling straight‑through processing, firms are well positioned to handle increasing ETF volumes and complexity efficiently, scaling operations without a proportional increase in headcount or risk.

Finally, we established several strategic partner integrations with Tier‑1 ETF servicing providers, giving clients the freedom to choose providers that best fit their operating model while preserving a seamless front‑to‑back workflow.

Technology partnerships are also central to our strategy. This lets us bring new capabilities to market faster as part of our integrated solution. For example, we recently announced our integration with Bloomberg’s BSKT service and we’re also leveraging Axioma’s market leading optimizer for negotiated basket creation.

Technology partnerships are also central to our strategy. This lets us bring new capabilities to market faster as part of our integrated solution.

Why should both incumbent and emerging ETF providers consider working with State Street and Charles River to streamline ETF issuance and management?

Steve: From State Street’s pivotal role in helping to launch the first U.S. based ETF in 1993 to our current position as one of the “Big 3” ETF servicers, State Street’s deep bench of industry expertise and servicing capabilities are second to none. By acquiring Charles River in 2018, State Street now offers a full end to end solution incorporating institutional level software solutions across the ETF lifecycle.

For existing mutual fund managers on Charles River, adding ETFs to their book of business is now a realistic proposition. Likewise, emerging managers can leverage State Street’s expertise and Charles River technology to streamline the launch of new ETFs.