Hector McNeil and Nik Bienkowski have a long entrepreneurial record in the ETF industry. As managing partners, they were pivotal in the success of ETF Securities; they also started Boost ETFs in Europe, which they eventually sold to WisdomTree in 2014—a U.S. issuer they later co-helmed in the European market.
Now they’re launching another venture, HANetf, Europe’s first white-label ETF provider. The firm is looking to help U.S. issuers and European asset managers new to the space bring ETFs to the European market for the first time. McNeil gives us the inside scoop on the barriers to entry and the opportunities for growth.
ETF.com: Has the structure required to issue ETFs in Europe been a barrier to entry to U.S. issuers? Is it that different from the U.S.?
Hector McNeil: Europe is the second-biggest ETF market in the world. It just popped through $700 billion in assets. It's had its fastest-growing year ever this year, and last year’s asset growth was a record. And European investors tend to prefer the UCITS structure to the ’40 Act.
If you've got a global clientele outside the U.S., they tend to like UCITS because it’s usually friendlier from a tax perspective. Under the ’40-Act wrapper, if you don't file a W-8BEN form for the U.S. tax authorities, you get charged with withholding tax. So, anybody offshore that doesn't want to file the W-8BEN form or be on the radar of tax authorities, they'll have a tax disadvantage with an ETF versus UCITS.
That's the same if you go to Merrill Lynch or Morgan Stanley in San Diego or Miami. They’ll have an onshore and an offshore team, and the offshore team will prefer to run the same ETF portfolios—but with UCITS for that very reason. For all we talk about Europe as one place, it's 30-plus countries that have different languages, taxes, different trading systems, different settlement systems, and obviously things like Brexit.
All these types of complexities don't exist in the U.S. Firms will come and it will take them anywhere between three to five years to figure out those complexities and what's required. That costs them a lot of money, time and opportunity. We’ve done that journey three times now all successfully, so we feel pretty confident we can provide a coherent rollout platform.
One essential difference relative to U.S. white-label providers is that we'll be not just providing the compliance and the fund umbrellas and structures, we'll also be doing distribution, marketing, sales, all those types of things, which, typically, U.S. white labels don't do. The only thing issuers will need to worry about is the investment strategies and what sort of ETFs they want to roll out.