It goes without saying that ETFs are increasingly big business, even in slow-coach Europe. The region is currently the second largest ETF market in the world, behind the United States, with just under $700bn of assets under management. Europe is also behind in one other, important, respect. In the core US market many of the biggest active asset managers – and even some retail stockbrokers such as Schwab – have their own ETF ranges. Over here in Europe, Invesco has obviously beefed up its exposure to the space via its takeover of Source ETFs but by and large, we still have the first wave of ETF majors in the saddle. Ignoring the obviously omnipotent US majors such as BlackRock

Ignoring the obviously omnipotent US majors such as BlackRock iShares and Vanguard, we still have an industry dominated by the likes of Deutsche, Lyxor and UBS – ETFs as an outgrowth of factory level investment bank flow. In the US by contrast, dedicated asset managers, independent of bigger houses, still play a much more important role. Another crucial difference with the states is the role of the humble indie, the small independent player with just a small stable of say 5 to 10 ETFs – again much more common in the US but almost completely absent in Europe.

Why are these smaller independent players so important? Put simply, innovation. In the US a bunch of experienced quants, prop desk traders or index specialists can literally rock up with an investment strategy idea, and turn it into an ETF. Rather than go to the extra ordinary lengths of creating their own exchange level issuance programme – and then sell the resulting product to a diverse customer base – new outfits can rely on a range of independent third-party distributors and white label ‘fund engineers’. Have index, will issue! This key structural innovation is currently aiding and abetting the rapid growth of multi asset and active ETFs stateside.

Back here in Europe, only ETF Securities through its Canvas operation and to a lesser degree Source ETF play this vital role. ETFS Canvas, for instance, has worked closely with both existing asset managers such as Lombard Odier and new index firms. Source has also played midwife to many new ideas although its traditionally tended to play more in the ‘hedgie’ space of alternative strategies.

What’s really needed is a quantum leap in this third party architecture. Imagine what would happen if the small army of independent discretionary fund managers for instance in the UK – currently servicing the IFA market – were able to take their asset allocation skills and translate them into bespoke ETFs? Alternatively imagine a world where the second tier mainstream asset managers, worried about the encroachment of passive on active were able to launch smart beta, lower cost variants of their existing actively managed strategies? Index developers could also flourish as they develop new products which they can quietly build into viable business units via an ETF issuance programme.

This alternative vision of niche ETFs – many of which might turn into tomorrow’s monster ETFs – requires a vibrant third-party issuance and sales sector which is largely lacking in Europe. ETF Securities Canvas operation and Source can only get so far implementing this vision – they need some competition. That looks like it is, finally, about to emerge. Today came news that European ETF industry veterans Hector McNeil and Nik Bienkowksi are aiming to “disrupt the European ETF market with the launch of Europe’s first “white label” UCITS ETF platform.

Called HANetf this new platform is designed to be a one-stop-shop for asset managers who want to enter the European UCITS ETF market without having to establish a full services business. According to the new business’ PR blurb “It is aiming to disrupt the market by lowering the barriers to entry for asset managers through an innovative platform, which provides services including product development, compliance, capital markets, sales, marketing and distribution.” It’s obviously still early days – apparently, HANetf is only now completing a seed funding raise in order to expedite the growth of the business but the market opportunity is obvious: combine a white label platform – a bit like Exchange Traded Concepts in the US – with a third party sales and distribution arm like ALPS.

It’s obviously still early days – apparently HANetf is only now  completing a seed funding raise in order to expedite the growth of the business but the market opportunity is obvious: combine a white label platform – a bit like Exchange Traded Concepts in the US – with a third party sales and distribution arm like ALPS.

That looks like it is, finally, about to emerge. Today came news that European ETF industry veterans Hector McNeil and Nik Bienkowksi are aiming to “disrupt the European ETF market with the launch of Europe’s first “white label” UCITS ETF platform. Called HANetf this new issuer is designed to provide a one-stop-shop for asset managers who want to enter the European UCITS ETF market without having to establish a full services business. According to the PR blurb “It is aiming to disrupt the market by lowering the barriers to entry for asset managers through an innovative platform, which provides services including product development, compliance, capital markets, sales, marketing and distribution.” It’s obviously still early days – apparently, HANetf is only now  completing a seed funding raise in order to expedite the growth of the business but the market opportunity is obvious: combine a white label platform – a bit like Exchange Traded Concepts in the US – with a third party sales and distribution arm like ALPS.

The end result? A veritable swarm of next generation active and smart beta issuers in Europe. For me the biggest opportunity is to take on the robo advisers at their own game: build a range of multi asset ETFs with varying risk levels and then get the big direct to consumer stockbrokers to sell the resulting all in one trackers down their retail channels with TERs well below 35 basis points. Crucially these innovators can play with much more alternative ideas and not just stick with the boring 60/40 equity/bond combinations – we could have smart beta multi asset ETFs, ESG multi asset ETFs, contrarian/momentum multi asset ETFs. Now that would be an innovation worth waiting for!