Inside Europe’s First ETF White Label

August 30, 2017 I'm sure you read all the drama recently involving ETF Managers Group and PureFunds about the ETFMG Prime Cyber Security ETF (HACK). Is your platform essentially a middleman renting out services for a fee, or do you have control over the ETFs?

McNeil: The structure is a lot more benign in Europe than it is in the U.S. The boards in the U.S. are a lot more activist than they are in Europe. You tend to find that the boards in Europe are more about simply making sure the ETF runs as it should and it's meeting all its obligations, etc.

Our simplistic view of this is that the strategy that the issuer or asset manager will be bringing to the table—which we will issue through our funds—is owned and retained by the asset manager. That's their intellectual property. They can bring it to the platform and take away from the platform if they want to.

We have no issue with anybody wanting to use our platform as a way to dip their toe in the water, to try three, four, five funds in the European market, and see if they get traction. If at some point they want to move that in-house, we'll have commercial terms that will allow them to do that. Our platform is open architecture. Will the ETFs all listed in the U.K. and then all European investors have access? How does the listing work?

McNeil: There are several layers to this. About 60% of all ETFs in Europe are domiciled in Ireland. The next biggest listing venue is Luxembourg, with about 18-20%. Our ETF fund company will be domiciled in Dublin, Ireland.

What happens is you cross-list across the markets. Our core service will be U.K., Italy and Germany—the Borsa Italiana, Deutsche Boerse and the London Stock Exchange. We’ll also tap into markets such as Switzerland, France, Holland, etc., but they’ll be more to demand.

Typically, each ETF is listed in four or five markets in Europe. That allows you to be local in those markets from a shop-window perspective. For instance, an Italian journalist wouldn't cover a product that's listed in London as an Italian product. But if it's listed on the Borsa Italiana, it's essentially seen as local. iShares and Vanguard already have ETFs in Europe. Is the target here more midtier, or lower-tier issuers, in terms of assets?

McNeil: There are a few issuers already in Europe. iShares is the biggest in Europe as well as the biggest in the U.S. Vanguard is big in Europe but not as big as it is in the U.S., top 10. But their product range is quite small here.

But for us, it's the next layer down. It's the equivalent of the WisdomTrees of the world that haven't made it over here yet. Even some of the smaller guys who have one or two products and are quite successful, they're getting calls from European clients or other clients who show interest.

We have two main target groups: U.S. issuers and the European asset managers new to ETFs.


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