Moving On
EquBot had previously worked with ETF Managers Group, better known as ETFMG, to list an AI-based ETF. Andrew Chanin, who helped set up HACK -- the cyber-security ETF at the heart of legal action against ETFMG -- meanwhile intends to issue ETFs from a new company called ProcureAM that he’s formed with industry veteran Bob Tull.
New regulations that are expected to be released for comment by October will likely make fund issuance even easier. The so-called ETF rule is set to scrap the need for new sellers of plain-vanilla ETFs to approach the Securities and Exchange Commission for exemptive relief from the Investment Company Act of 1940. This will further cut both the time and money needed to start an ETF.
But Garrett Stevens, chief executive of Exchange Traded Concepts, a white label with $3.3 billion of assets, isn’t overly concerned.
“Exemptive relief aside, it will take you a year to set up the infrastructure to launch an ETF on your own,” he said. “We’ve made it look easier than it is.”
That infrastructure includes establishing an investment trust to house the fund, setting up a board of directors and getting essential service providers -- like a custodian, lead market maker and the authorized participants that create and redeem ETF shares -- lined up, ETC’s Stevens said.
Redefining Value
It’s this command of the wider ETF ecosystem, not regulatory approval, that white labels will rely on going forward.
Exponential’s Bak, for example, emphasizes his firm’s experience in compliance, operations and portfolio management. Marketing and public relations capabilities can also make a white label stand out, Venuto said. ETC even offers clients help designing their websites.
White labels still seem to offer some value to those who previously used ETFMG. In addition to proprietary funds, Chanin’s new venture encompasses a white label for sponsors that want to directly pay service providers, according to Tull. And EquBot will use U.S. Bancorp’s investment trust for its new fund alongside its own exemptive relief.
White labels also offer a door to financial advisors that smaller shops can’t open, according to Vince Birley, chief executive officer at Vident Financial, which started several funds with ETC. That’s one reason he won’t be going it alone anytime soon.
“They definitely have to redefine what they’re bringing to the table,” he said. “But after I look at what they do for us, I really don’t want to take that on. For us, at our size, it still makes a lot of sense.”
This article was provided by Bloomberg News.