Various Colors To ‘White Label’ ETF Providers

August 03, 2017

Exponential ETFs

Phil Bak, head of Exponential ETFs, a firm that doesn’t consider itself a full-fledged white-label provider, but one that considers partnering in ETFs that fit their overall expertise and goals, sees the dispute between ETFMG and PureFunds as a black eye on the industry. Exponential has two ETFs in the market, and is wholly owned by ACSI Funds, an asset manager of ETFs and hedge funds.  

“It’s shameful what happened. There was no ambiguity about the relationship, the roles and what ETFMG was selling when the fund launched. The fact is that it’s a lot sexier to be a $1 billion asset manager than it is to be a service provider that’s offering operational support for an up-charged fee, and that seems to be the driver for the change from ‘your ETF your way; we are not competing with our clients, we are client focused’ to what we are seeing now.

Our business, Exponential ETFs, is not a traditional white-label shop. We will selectively partner with asset managers whose ideas are complementary to what we do, and match our expertise. But we are not actively seeking white-label deals in the traditional sense.

In our model, all of our standard contracts include language that protects our partners. We’d never act in that way, but we don’t have our own trust—we partner with U.S. Bank. Their board has final decision on certain aspects of the funds, but we have exemptive relief, and we have a broker-dealer, so we have certain controls on our end.  Our model is a little different because we are not trying to mark up operational services for a small fee. We are investing in the long-term success of Exponential ETF’s products.”

For investors, this is a lot of inside baseball. But for an investment professional looking to get into the ETF business with a white-label provider, it's clear there are significant differences between competing solutions. This space is hardly vanilla, and each firm operates differently.

Contact Cinthia Murphy at [email protected]

 

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