Various Colors To ‘White Label’ ETF Providers

August 03, 2017

ETF Managers Group

Sam Masucci, head of ETF Managers Group, argues it’s all going down according to contracts. ETFMG manages 11 ETFs with some $1.5 billion in combined assets.

“‘White-label ETF provider’ is a broad umbrella, but my business and ETC are vastly different. ETFs are issued by trusts, and those trusts are governed by a board that typically has independent trustees and affiliate trustees. ETC doesn’t operate a series trust, they rent them. Garrett doesn’t have a seat on those trusts, so they are significantly removed from the governance of the issuance of securities.

Conversely, our funds are issued out of the ETF Managers Trust. I’m a trustee. I’m going to have a greater level of the operational control of the ETF than Garrett would. That’s the core difference.

I also do the portfolio management in-house, whereas ETC rents portfolio management. I have a broker-dealer, and we sell our securities here. ETC doesn’t do their wholesale. ETC brokers services; we provide the majority of the services.

Because of that, our contracts clearly state that these funds are issued, operated and very much in the control of ETFMG. There are specific provisions in our commercial agreements that preclude our partners from interfering whatsoever with the operation of the fund.

We can end the relationship with any partner and terminate the commercial agreement, but that’s not the same as closing a fund. The security is not governed by that commercial agreement. The security is governed by an advisor agreement and the trust board’s interest in issuing it. We have every right to continue supporting funds even if the relationship with the partner is terminated.  Public securities cannot be governed by commercial agreements. It’s only the board that can decide to close a fund or make a change. That’s why I made the decision when we started this company in 2012 that we wouldn’t rent trusts and boards, but we would create our own trust, I’d have a seat as an affiliate trustee, and we would have independence, and a greater level of control of the operations.” 

 

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