White-label ETF issuer HANetf is set to expand to the US in 2022, just four years after entering the European ETF market.
Speaking to ETF Stream, HANetf co-CEO and founder Hector McNeil said to access a global client base, an issuer needs to have UCITS and 1940 Act-compliant ETFs which provide coverage of not just Europe and the US but also Asian and Latin American investors.
The senior management team at HANetf – McNeil, co-CEO Nik Bienkowski and COO Manooj Mistry – have launched nearly 1,000 ETFs between them in their careers with Mistry’s team at Merrill Lynch responsible for launching the first ETF launch in Europe in 2000.
Now, with clients soft-committed to supporting their expansion, the firm will target the larger and more retail-oriented market over the pond.
Gaps in the market
Naturally, their initial approach will focus on areas they see as currently lacking in the US.
One such area, McNeil told ETF Stream, is a comprehensive white-label model which takes a firm’s IP and then does most of the legwork from launch onwards.
“They only really focus on getting the ETFs out and do not really provide you a comprehensive distribution – marketing, digital marketing, PR, capital markets solutions, legal compliance and so on,” McNeil said.
Is there enough interest in ETF white labelling?
For this, most IP holders in the US currently have to go to about five or six different service providers, which he said represents a missed opportunity, given that while Europe is more of a game of scale, the US market is more entrepreneurial, with many issuers managing to be successful with only a handful of funds.
The firm also sees gaps on the product side, where McNeil noted a reverse of regular patterns. Whereas Europe often lags the US by three or so years in most areas of product innovation, this is inverted on the ESG front – especially on environmental issues – where the US ETF space is comparatively underdeveloped.
Owing to this, McNeil said HANetf will pick up new themes as they arise, contemplate more vanilla exposures than seen in their current line-up and release ‘ESG/S’ labels (ESG-screens) on its exposures.
“That initiative has not even touched the sides yet in the US so the time is right,” McNeil added.
“The two parties that we are particularly talking to have got big distribution potential in the US, so they will want some quite specific products for them to launch that will probably be a little bit different than the thematic offering we have done already – maybe a little bit more vanilla than we have done before but still not cheap beta.”
Another focus for HANetf’s US roll-out will be adapting to an ETF landscape with a unique culture – especially the larger role of retail and DIY investors who enjoy compelling narratives.
This will involve cultivating its brand identity, which is a partly top-down approach, with the likes of Cathie Wood just one example of the influence a figurehead can have in US ETFs.
On potentially filling that role himself, McNeil said: “One of the things I enjoy the most in the industry is opining, not just on HANetf but industry wide, because I care about the industry and it is something I know inside and out.”
He also pointed out that despite the sharp growth of ETFs popularity, the top end of the industry has remained a relatively similar group of familiar faces for more than a decade.
Finally, HANetf wants to communicate its investment cases by means other than word-of-mouth.
While already having marketing budgets dedicated to its individual products, as will monthly updates for each, the company will have to balance its ambitions with its bandwidth as it scales up in both product range and geography.
This means, although HANetf has made eight hires since the start of the pandemic and two more on the way, the firm will also have to automate.
From a distribution perspective, McNeil said the sales team will operate in a targeted capacity – but he is optimistic about the role of digital marketing in sharing the stories attached to products en masse.
“With an ETF, nobody ever walks away with a ticket in the sale process,” McNeil continued. “The client hears the pitch or researches the ETF and can buy or sell without anyone at the ETF issuer ever knowing.
“The client might do a $10m ticket without ever telling us, whereas for a mutual fund it's a direct purchase: the fund is sold, money passes hands and the units are delivered
“Therefore, the digital marketing will be the absolute key, because we cannot go over to the US with a small army of a 50-person wholesaling salesforce, so we have got to be able to get our message out smartly and one of the cornerstones of the HANetf business is we love products with stories, so we have got to be able to get those stories out there.”