ETF Shakeup: PureFunds Brand Name Ousted

July 31, 2017

After the close of business on Friday, ETF Managers Group (ETFMG) made a rather stunning move when it announced in a press release that the family of PureFunds ETFs would be rebranded with the ETFMG name as of Aug. 1. The move was also documented in a filing to that effect that hit the SEC Edgar database the same day.

Furthermore, the three funds tracking indexes from the International Stock Exchange (ISE) will track benchmarks provided by Prime Indexes, which was co-founded by Kris Monaco, formerly head of ISE’s ETF Ventures operations who is now a managing partner with Level ETF Ventures. The ISE is currently owned by Nasdaq. Included in the sweeping changes is the well-known $1.2 billion PureFunds ISE Cyber Security ETF (HACK), PureFunds’ flagship product.

The move is neither an amicable parting of ways nor business as usual. PureFunds Founder and CEO Andrew Chanin confirmed that the PureFunds brand had not been sold and noted in the following statement that a lawsuit has been filed:

“ETF Managers Group, LLC and ETF Managers Trust terminated Nasdaq and PureFunds interest in the “PureFunds ETFs.” PureFunds has filed suit against ETF Managers Group, LLC, the ETF Managers Trust and their principals, including Samuel Masucci and Barney Karol, Esq. before the Superior Court of New Jersey, Union County to address the termination.”

Christian Magoon, CEO of Magoon Capital and Amplify ETFs, is taken aback by ETFMG’s move. He has a consulting contract with the ISE to assist with HACK’s sales and marketing in addition to serving as the fund’s media spokesperson.

“This is the first white-label provider I’ve aware of that has terminated the firms who developed the investment idea, index and had economically supported the products in question. This should give serious caution to any firm considering a partnership with a white-label provider as reputation is key,” Magoon said. 

“While this termination is being disputed, Friday’s news stands as a great loss to Nasdaq and PureFunds as it stands today. The outcome of this disputed termination will likely be decided by the court case already underway,” he added.

ETFMG Weighs In
ETFMG Founder and CEO Sam Masucci says that PureFunds’ relationship to the funds bearing its name is purely a marketing one. ETFMG is the issuer of all of the PureFunds ETFs.

“We have terminated the marketing relationship we had with PureFunds. They violated certain agreements that we had, and it forced us to terminate the arrangement. They don’t have any operating role in the fund—they never have, he explained. “They had a marketing role, and the funds are issued by the trust. The trustees along with the advisor decided that after multiple violations or issues with the partnership that we had no choice but to terminate them.”

Masucci declined to characterize the exact nature of the agreement violations.

“We had a service agreement with them where they were going to provide some marketing, and they did. They had to meet certain obligations that were in our agreement, and they failed to do that,” he added. “After several attempts to get them to try and live within the bounds of the agreement and their continued refusal to do that, we had no choice.”

Although Chanin has been the public face of the PureFunds ETFs, Masucci says he played no role in the development of the funds and was involved in solely a marketing capacity.

“All of the PureFunds and the indexes were created by ISE Ventures, which was headed by Kris Monaco. Kris is back involved with the funds, Masucci noted. “It’s actually a positive to get the originator of these ideas and these indexes back involved in that particular role. We’re excited about it—it’s been very well-received by the advisors we’ve spoken with.”

 

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