ETF growth in Europe attracts new white-label providers

A number of exchange traded fund white-label providers have entered the European market, hoping to gain traction among active managers who want to partner with an existing provider to bring their own products to market.

Axxion and asset management servicing group Waystone have both launched ETF businesses recently, while exchange traded product specialist Leverage Shares and cryptocurrency-focused asset manager Iconic Funds have also entered the white-label space.

Jose Garcia Zarate, Morningstar’s associate director for passive research, said the arrival of more white-label providers was a sign of the growing popularity of the ETF wrapper among investors.

“This hasn’t been a good year for the investment fund market overall, but you only have to look at flows to see that ETFs are holding up relatively well,” he said.

ETFs have attracted positive net flows in Europe this year, albeit at lower levels than previous years, whereas open-ended mutual funds have attracted net outflows, according to Zarate.

“Inevitably, all sorts of asset managers — small, medium, large — that so far have shied away or ignored the ETF market are taking notice,” he said.

Paul Heffernan, Waystone ETF chief executive, said his company had seen huge demand from its institutional clients to enter the European ETF market.

“The fund flow numbers have been steadily rising year on year and 2022 has been the first year that ETFs have outstripped mutual fund flows on an absolute basis, which is remarkable given the legacy distribution models across Europe,” he said.

Benjamin Linn, relationship manager at Axxion, said ETFs had become increasingly important in recent years.

“On the one hand, this allows us to reach broader groups; on the other hand, we enable our fund initiators to benefit from general ETF advantages, such as costs, transparency and liquidity,” he said.

The new launches come five years after HANetf founded its white-label ETF business.

Michael O’Riordan, founding partner of Blackwater Search and Advisory, said the new launches were more a case of groups trying to take market share off HANetf, rather than any specific client demand for white-label providers.

This article was previously published by Ignites Europe, a title owned by the FT Group.

“HANetf has been the incumbent in Europe for a long time, so it’s only natural some competition would come along at some stage,” he said.

“Whether they will be successful is anyone’s guess.”

Zarate said white-label ETF companies “come in handy” because entering the ETF market can be highly complex and expensive in operational terms, particularly for smaller asset managers.

“They provide all the infrastructure to get products out, they deal with the regulatory requirements and can even manage the ETFs on behalf of their clients,” he explained.

“These white-label companies can also be used by larger asset managers who may just want to test the ETF waters, before committing internally to setting up all the necessary infrastructure to run an ETF business themselves.”

Deborah Fuhr, founder of ETFGI, said: “Some of the smaller ETF issuers have built out infrastructure and now that it’s built, there’s an economy of scale they can work with and offer to others.

“If I’m a small ETF provider and I partner with some larger firms that don’t really know whether they want to get into the market or not, but want to try it, I can allow them to use my infrastructure to quickly come to market.”

Fuhr added that there were already a number of white-label ETF companies in the US, which has a much larger ETF market.

*Ignites Europe is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at igniteseurope.com.

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