The underserved white-labelling market in Europe is undergoing a potentially transformative moment as two issuers enter the space and plan to launch up to 18 products in the next year.
Although white labelling has existed for some time in European ETFs, in the form of Canvas ETF which was later acquired by Legal and General Investment Management and Algo-Chain via model portfolios, the only true one-stop-shop for white label ETF issuance in recent years has been HANetf.
Offering clients the infrastructure needed to wrap their IP in ETFs and exchange-traded products (ETP) such as its platforms, regulatory approvals, seed capital, exchange listing, fund management, trading networks and distribution, HANetf successfully amassed $3bn assets under management (AUM) since the launch of its first product in 2018.
Now, however, its dominance in white labelling, at least on the ETP side, will face some competition after Leverage Shares listed its active equity ETP on the London Stock Exchange on 9 June and crypto issuer Iconic Funds announced its white labelling ambitions on 15 June.
Speaking to ETF Stream following the launch of Kronos Strategy ETP (KRON), José Poncela, head of product development at Leverage Shares and former colleague of HANetf founders Hector McNeil and Nik Bienkowski at ETF Securities, said: “There is quite a healthy pipeline of smaller hedge funds, active managers in the US and elsewhere who want to have the ETP structure and we can do that, that is our target.”
He added there is an element of “critical mass” to their white label push and once the firm has 10 products with third-party clients, this represents a “proper offering”.
“We want to have five to ten white label products by the end of the year,” Poncela said.
A key consideration for Leverage Shares will be whether clients are happy to settle for the non-UCITS ETP structure it offers, with UCITS being a well-regarded and important element for many professional investors.
Poncela said his firm will give clients the chance to launch wrapped products in Europe without having to “spend a fortune” to figure out if a UCITS ETF is worthwhile – which is a “different ballgame in terms of cost”, he argued.
“For the time being we will stick with ETPs,” Poncela continued. “It is all about demand for the UCITS ETF. We might think about it but I do not see that in the short to medium term.
“If a small provider sees acceptance in Europe, maybe the economics could be there for a UCITS ETF.”
Outside of its plans for third-party active managers, Leverage Shares has also received requests for white-label passive products and said it would consider commodities, futures and more if demand exists.
On crypto, Poncela said: “We have received requests to do crypto as well and this is something we are thinking about – but it is a longer-term exercise.”
Iconic Funds, meanwhile, already has the infrastructure and platform needed to white label crypto ETPs – and the issuer’s CEO Patrick Lowry confirmed last Wednesday it will partner with “incumbent financial institutions” to do just this.
In fact, Iconic’s crypto ETPs head Michael Geister told ETF Stream the firm could announce its first white label partnership on two vanilla crypto ETPs “within the next two weeks”.
After contemplating white labelling last year, Iconic decided to begin its ‘ETP-As-A-Service’ line and expects to launch between six and eight products with third parties in the next 12 months, Geister said.
“Other white label products are in the pipeline as we see a large demand for such services given that traditional asset managers are unable to manage crypto assets themselves,” he added.
In terms of where these will sit in its product range, it is likely Iconic’s native products will offer more nuanced exposure, however, Geister said some clients had been interested in crypto thematic exposures and yield strategies.
To support these plans, the firm also recently acquired a “well-established quantitative crypto asset management team”.
Explaining the white-label explosion and these recent entrants to the space, Leverage Shares’ Poncela said the complexity of the European market creates demand for operators with existing infrastructure and understanding of the fragmented countries, currencies, languages and regulations.
Demand for these services from third parties in Europe and elsewhere will likely only increase, he concluded, as retail usage of wrapped products increases in Europe.