Lisa Mantil, global head of Goldman Sachs ETF Accelerator, has revealed the firm is set to launch its first ETFs in Europe by the end of 2023, just a year after its platform-as-a-service launched last November.
Speaking to ETF Stream just before marking her twenty-fifth year at Goldman Sachs, Mantil (pictured) described the “huge milestone” of ETF Accelerator’s first ETFs going live in the US in August and the “buzz” surrounding active ETFs which will be the firm’s focus.
Outside of the tax advantages driving US ETF adoption, Mantil said there is a global convergence of active management and ETFs as investment managers look to broaden distribution of their strategies across different structures.
“We are very hopeful to have our first products in Europe by the end of this year,” Mantil told ETF Stream.
“That is subject to a lot of factors both in our control and out of our control. It could be Q1 next year and that would be ok. What matters is we are building the appropriate foundation and there is no part of this we are going to rush.”
She added the team has been “pleasantly surprised" by the conversations already taking place across the continent regarding packaging active IP within an ETF.
“The majority of the meetings we are going into, we think are going to be more ‘101’ educational, when in fact they already have all the numbers and are excited to think about how to expand their distribution channels into younger audiences,” Mantil said.
However, US asset managers and locally-domiciled asset managers in Europe looking to launch across the continent remain daunted by the fragmentation of different regulatory environments.
“There are still some very specific country nuances we are trying to make sure we have a really good sense of, however, we have a firm belief that we want the technology to be the same across the globe,” Mantil continued.
“The elemental process of launching a ’40-Act’ or a UCITS ETF is actually very similar. You have to draft registration statements and you have to list on exchange with individual country nuances to consider.”
The ETF Accelerator team also noted active fixed income as an area of opportunity after engaging with clients, the macro backdrop “driving demand” and “very few sharp tools available in Europe”.
To service this demand, Goldman Sachs has made over 75 hires globally including EMEA head Rebecca Anderton-Davies and EMEA COO Jürgen Blumberg.
Its European team is comprised of client development and service personnel in London and portfolio management and capital markets divisions in Paris, a split Mantil said maximises flexibility when accounting for regulatory considerations including Brexit and MiFID II.
‘Not a white-label’ platform
Aside from its focus on actively-managed ETFs, Mantil is keen to separate ETF Accelerator from the incumbent white-label ETF issuers in Europe by advertising itself as “the first institutional service provider for ETFs”.
“We are not a white labeller. We are not the adviser. We are not a sub-adviser. We are a service provider,” Mantil said.
“We are deliberately structured that way because our institutional Goldman Sachs clients do not want to lose control. They want to have control of their fund we wanted to be able to package this platform so we were the first institutional outsourced service provider.”
Rather than offering end-to-end services including marketing, distribution, branding or strategic input, ETF Accelerator focuses on the operational “pipes and plumbing” by leasing access to Goldman Sachs’ own divisions including risk management, market making, liquidity providers and authorised participants within a single platform.
Mantil underscored the other selling point of the platform-as-a-service being the ability to offer clients global reach from a single point of onboarding while significantly cutting time to launch.
“We hear from clients that from the second they say they want to enter ETFs, the launch process takes two years. We have heard up to seven years and this process includes retrofitting your technology to handle ETF basket services and hiring a number of ETF experts across legal, operations, ETF portfolio managers and capital markets specialists.
“We will get asset managers to market with your first ETF in six months or less. They will not have to hire this team of 15-25 people because we are bringing this team of experts to them.
“The other factor that has really resonated is the global nature of our platform, with ‘40-Act’ and UCITS ETFs. That concept of being able to onboard and launch across the globe has been a strong selling point.”
Low barriers to entry, high barriers to success
Despite regulatory complexity, there have been swathes of new entrants to the European ETF market in recent years.
However, many asset managers have run afoul of unfavourable market conditions and the fact three issuers control more than two-thirds of all ETF assets under management (AUM).
Among these are a several US issuers that chose to partner with third parties to enter Europe, only to shut their ETFs after poor asset-gathering – including Europe’s first white-labelled actively-managed ETF.
Active ETFs have – with a few exceptions – struggled to gain notable traction in Europe, with little over $25bn assets spread across 101 products, as at the end of June, according to Bloomberg Intelligence.
Within this class is abrdn’s debut European ETF which houses just shy of $11m since launching in March.
Responding, Mantil argued: “Everyone says the European market is five to 10 years behind the US. I do not believe that to be the case based on our current pipeline of clients. The end goal is to have hundreds of clients on this platform globally. The question is how long this takes.”
This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To access the full magazine, click here.