How A White Label ETF Provider Works

December 08, 2016

New ETFs are launched often, and many of them aren’t coming to market through established issuers such as iShares and State Street, but rather through third-party providers who help new entrants build up their ETF franchises one ETF at a time. Sam Masucci, head of ETF Managers Group, a white label ETF provider, tells us how it works and why it makes sense for newcomers to go this route. ETF Managers Group today is the issuer behind 14 ETFs, with about $840 million in total assets. 

 

Ticker Fund Brand Expense Ratio AUM
HACK PureFunds ISE Cyber Secirity ETF PureFunds 0.75% $734.20M
SILJ PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF PureFunds 0.69% $59.12M
IPAY PureFunds ISE Mobile Payments ETF PureFunds 0.75% $46.97M
RISE Sit Rising Rate ETF Sit 1.50% $10.63M
IFLY PureFunds ISE Drone Economy Strategy ETF PureFunds 0.75% $8.01M
GAMR PureFunds Video Game Tech ETF PureFunds 0.75% $7.59M
ETHO Etho Climate Leadership U.S. ETF Etho 0.45% $6.85M
ITEQ BlueStar TA-BIGITech Israel Technology ETF ETF Managers Group 0.75% $4.90M
LARE Tierra XP Latin America Real State ETF Tierra 0.79% $2.62M
WSKY Spirited Funds/ETFMG Whiskey & Spirits ETF ETF Managers Group 0.75% $2.35M
BIGD PureFunds ISE Big Data ETF PureFunds 0.75% $2.31M
FINQ PureFunds Solactive FinTech ETF PureFunds 0.68% $2.30M
IMED PureFunds ETFx HealthTech ETF PureFunds 0.75% $2.30M
BITE Restaurant ETF ETF Managers Group 0.75% $1.38M

 

ETF.com: Tell me the gist of how a white label service like ETF Managers Group works. Why should someone bring an ETF to market with you?

Sam Masucci: What a new issuer or entrant into the ETF space needs to think about is, do they want to go through all of the time and money associated with getting into the space?

That means getting regulatory approvals, and building up the infrastructure, including compliance, fund accounting, legal, as well as all of the operational and portfolio management responsibilities. There are a lot of costs associated with all of that.

Typically, to set something up from scratch, you're looking at two years and $2-3 million of upfront cost. You’re going to have to hire seasoned ETF-skilled people to run legal, compliance, trading, wholesaling and operations.

What we provide is a solution for people who want to get into the space but don't want to go through the pains of creating all of that on their own. It's a tremendous economies-of-scale business.

The cost to run one or two ETFs, from an operational standpoint, is the same as running 20 ETFs. It's very costly when you're running one or two, and a lot less costly when you're running significantly more than that.

ETF.com: How much does it cost to launch an ETF with your firm?

Masucci: When someone comes to ETF Managers Group, they're looking at 75 to 90 days to market for a traditional ’40 Act ETF. The cost is less than $100,000; it's usually around $75,000. That compares to a couple of years and $2-3 million of capital expenditure if you’re doing it from scratch. And from an ongoing standpoint, we can run a fund for around $250,000 a year. That covers everything.

It’s a very cost efficient way for people to bring ideas to market. And I've been in the ETF space now since 2002. My more senior management here has been in there that long as well. One of the attorneys on staff, my partner in the business, wrote the first iShares prospectuses.

We've been in the business a really long time. We have great third-party relationships with custodians like US Bank, and with auditors like WithumSmith and Brown. All of that saves time and money.

 

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