Joe Benoit, Grimes & Co.

Joe Benoit is a portfolio manager at Grimes & Company, a registered investment advisor based in the Northeast that manages approximately $3 billion in client assets. Joe's specialty is fixed income, and the firm recently launched their first ETF to bring their bond management approach to a wider audience. On this episode of Behind the Ticker, Joe joins Brad to talk about the transition from managing bonds across thousands of separate accounts to wrapping that same strategy in an ETF, the firm's credit-driven approach to fixed income, and what advisors should be thinking about in the current rate environment.

From $3 Billion RIA to First-Time ETF Issuer

Grimes & Co. has been managing money for decades, primarily through separate accounts and model portfolios for advisors and institutions. Joe explains that the decision to launch an ETF was driven by client demand and the practical advantages of the ETF wrapper. Managing individual bonds across thousands of separate accounts creates enormous operational complexity. Every account needs individual trades, individual tax lot tracking, and individual rebalancing. When you're doing that across a large book, the operational burden becomes the bottleneck rather than the investment process itself.

An ETF centralizes all of that into a single vehicle. Advisors can use it across their entire book with one trade instead of hundreds of individual bond transactions. Joe acknowledges that the SMA approach has real advantages for larger accounts, particularly around tax loss harvesting and customization (excluding specific issuers, adjusting duration for individual needs). But for the majority of advisor clients, especially those with smaller account sizes where buying individual bonds in round lots isn't practical, the ETF provides better access to the same investment process, the same team, and the same research in a more efficient wrapper.

The Fixed Income Investment Process

Joe describes Grimes' approach as fundamentally credit-driven. They're analyzing investment-grade corporate bonds at the individual issuer level, looking at financial health, debt coverage ratios, earnings stability, and the trajectory of credit quality. They're not trying to make big duration bets or time interest rate movements. The focus is on security selection and credit quality, building portfolios bond by bond.

The portfolio construction uses a ladder approach, spreading maturities across the yield curve so that bonds are constantly maturing and reinvesting at current rates. This naturally manages reinvestment risk and provides a steady stream of income without requiring the portfolio manager to make large tactical shifts based on rate forecasts. Joe emphasizes that predicting interest rate movements has humbled some of the best macro investors in the world. By laddering maturities, you sidestep that problem entirely and let the portfolio self-adjust to whatever rate environment develops.

Brad asked about the current environment, with rates having risen significantly from the zero-rate era. Joe sees this as genuinely favorable for fixed income investors for the first time in years. With investment-grade corporate bonds yielding 5-6%, you're getting meaningful real income without stretching into lower-quality credits. He notes that investors who spent the last decade reaching for yield in high yield bonds, preferred stocks, or exotic income products can now find attractive returns in high-quality investment-grade bonds. The risk-reward has shifted decisively back toward quality.

Lessons from the RIA-to-ETF Transition

Joe shared candid insights about what it takes to go from running a successful RIA to becoming an ETF issuer. The regulatory requirements are a different world. Going from managing SMAs with direct custodian relationships and straightforward compliance, to meeting 40-Act requirements with independent board governance, daily prospectus obligations, and daily NAV calculations is a substantial step up in complexity. Grimes worked with experienced service providers to manage the transition, but even with expert help, the learning curve was significant.

Distribution is the other major challenge that Joe highlighted. Running a successful RIA with $3 billion in assets doesn't automatically translate to ETF distribution capability. The advisor channel, institutional buyers, and retail investors all discover and evaluate products differently. Building a distribution strategy requires a different set of skills, relationships, and resources than managing the money itself. Joe says Grimes is in the early stages of that buildout, and he appreciates the honesty of other ETF issuers who've told him the same thing: the investment management is the easy part, the distribution is the hard part.

Key Takeaways

• Grimes & Co. manages approximately $3 billion and launched their first ETF to deliver their fixed income process beyond SMA clients, especially to smaller accounts where individual bond purchasing isn't practical.
• The investment approach is credit-driven, focused on investment-grade corporate bond selection and yield curve laddering rather than duration bets or interest rate timing.
• With investment-grade corporates yielding 5-6%, Joe sees the best environment for quality fixed income in years. Investors no longer need to reach into lower-quality credits for meaningful income.
• The transition from RIA to ETF issuer involves significant regulatory complexity (40-Act governance, daily NAV, independent board) and requires building an entirely different distribution capability.
• For smaller advisor accounts, the ETF wrapper provides access to the same institutional-quality fixed income process as the SMA with dramatically less operational complexity.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.