Inside Europe’s First ETF White Label

August 30, 2017 Do you anticipate U.S. issuers will use your platform to bring to Europe strategies that have been successful in the U.S. and replicate them there? Or are they going to be creating completely new strategies targeted at European niches?

McNeil: I think initially they want to replicate what they're doing already in the U.S. There’s demand for these successful U.S. strategies coming from offshore desks in the wire houses and wealth managers, who are looking for these strategies for offshore clients. 

Initially, U.S. issuers will list in Europe what I call a handful of “superstars,” their top U.S.-listed ETF products.

But then they'll get customer feedback, and they’ll say they have other products that are based specifically in the U.S. but that are strategies that can lend themselves to European equities, and new products will emerge. We'll come in and do some business development to create similar products with different exposure for European investors. 

But, yes, initially I think they'll bring over to Europe their flagship products. Can’t European investors just buy ETFs in the U.S. market?

McNeil: They used to, but it's becoming much more restrictive now from a regulatory perspective. For instance, in the past, mutual fund managers in Europe would have been able to buy U.S. ETFs. Now they're not able to do that unless the U.S. issuers have certain tax exemptions and meet certain regulatory requirements, which most of them don't. Instead, we’re seeing European asset managers having to exit those U.S. ETFs.

That's one of the major reasons we see opportunity in the $700 billion Europe ETF market. That may seem small relative to the U.S., but the next largest is Japan, which is a couple hundred billion. It's significantly bigger than anywhere else in the world, and growing as quickly, if not faster, than the U.S. In the U.S., we predict the ETF market to surpass the mutual fund market by 2025. What’s your projection for the European market?

McNeil: I typically say that Europe is five years behind the U.S. in terms of the rate of growth, the type of products, the adoption by advisors and wealth managers, etc. I've been involved in ETFs since the early 2000s, and that's always been the case.

If you're looking at 2025, I’d say we could be looking at 2030. There’s a lot of regulatory change coming around transparency and robustness and costs. All that sort of stuff is really playing into ETFs in Europe.

Contact Cinthia Murphy at [email protected]


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