Waystone ETF CEO reveals plans to ‘conquer’ European ETF market

Regulatory tailwinds from the US set to boost European ETF demand

Theo Andrew

a man wearing a suit and tie

Waystone ETF CEO Paul Heffernan has revealed the firm’s ambitions in Europe as it becomes the latest entrant into the continent’s rapidly growing white-label ETF market.

Speaking to ETF Stream, Heffernan said the newly launched arm of financial services firm Waystone will target large asset managers looking to make headway in the ETF space, as it eyes a huge growth in the European market driven by regulatory trends from the US.

Waystone ETF, which offers white-labelling solutions alongside customised standalone platforms for asset managers and broader servicing solutions, will leverage its current regulatory permissions and distribution licenses in a bid to fast-track its ETF offering.

HANetf was the only white-label issuer in Europe to offer ETFs, however, the past few weeks have seen both Leverage Shares – through its Kronos Strategy ETP (KRON) – and Iconic Funds announce white-labelling ambitions on the ETP side.

“We want good investment ideas and quality managers. We will provide our institutional framework to wrap that strategy in an ETF, leveraging our know-how to conquer the ETF market,” Heffernan said.

“The white-label platform will be geared towards anything under $100bn of asset manager, if you are any larger than that then we will talk to you about our standalone platform.”

Waystone ETF’s standalone platform will primarily target asset managers which have so far been reluctant to enter the ETF market, helping them build and distribute ETFs across key markets in Europe.

The firm hopes to have its first product launched towards the end of the year or early 2023 and is already eyeing ambitions beyond Europe.

Heffernan said: “We will potentially look at Latin America and Asia if we think the product demand and the client demand takes us there but that is part of leveraging the UCITS brand.

“Phase one is to focus on European product and take it international while our phase two plan is to look at global expansion and that will include the US.”

He added that Waystone’s current product structuring capabilities are well geared towards bringing active strategies to market, which could include mutual conversions, as the firm looks to capitalise on regulatory developments in the US which it expects will transition into Europe.

“We will appeal strongly to institutional active managers that have historically refused to enter the ETF space for a whole host of reasons but have realised they have to get into the game,” Heffernan said.

“Our clients are asking us for ETF solutions so it makes absolute sense from a business strategy perspective. Given the size and scale of Waystone, it is an institutional play for us, that is where our client base is and that is where we are seeing demand.

“There is an incredible amount of runway still to go in Europe. It is still only $1.5trn and we believe the tailwinds in the ETF system globally, and in Europe, play into the market growing substantially.”

Commenting on some of these tailwinds, Henry Glynn, head of ETF capital markets and distribution at Waystone ETFs, who also joined this month, said it was important to look to the US to capture future growth.

“There are seven or eight white-label ETF issuers in the US. There are just a handful in Europe so we feel there is definitely room for more,” he said.

“In areas such as ESG, there is a lot of runway in terms of products and issuers to come to market [in Europe]. There are also non-transparent ETFs which have been approved in the US. If that comes to Europe, we could see a hell of a lot more entrants come to the European market as well.”

Will Europe ever see non-transparent ETFs?

While active ETFs in Europe have to disclose their holdings daily, there are signs that non-transparent ETFs could have a future in the space with a steady procession of North American issuers coming to Europe to launch UCITS products.

In April, the International Organisation of Securities Commissions (IOSCO) signalled non-transparent ETFs could have a future in Europe in its ETF Good Practices report.

“The reality is that some active managers are comfortable with portfolio disclosure and for this cohort the regulations today are fit for purpose,” Heffernan added. “However, we see regulatory progression in many markets.

“The recent IOSCO consultation report could be the catalyst for further regulatory progression in other markets, including Europe. Waystone ETFs will be at the forefront of these developments with clients.”

Moving forward, both Heffernan and Glynn will be responsible for building out the platform, using the wider Waystone distribution team to expand the capital markets segment.

“Capital markets is a key component of the ETF ecosystem. We are already carving out the ETF experience in the team and they will be refocused and appointed to support the ETF activities that our clients will need including relationship management and onboarding,” Heffernan said.

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