ETFs
AI-focused ETF will be the first European fund launched on the Goldman platform
An exchange-traded fund focused on artificial intelligence will on Thursday become the first ETF in Europe to launch through a Goldman Sachs-run platform for small fund managers.
The AI-Enhanced Eurozone Equities Ucits ETF, managed by German bank Baader and based on an investment strategy designed by Ultramarin, which specializes in AI-based forecasting models, will be listed on the Xetra Frankfurt exchange.
The launch marks the first time a major financial institution has helped a European ETF issuer bring a fund to market, a sign of the growing importance of the continent’s ETF industry, which recently surpassed 2,000 billion dollars in assets.
Goldman’s ETF Accelerator is similar to “white label” platforms designed to make it easier to launch third-party funds that have proven popular in the United States and made headway in Europe.
These platforms allow smaller fund managers and new entrants to launch ETFs more quickly and cost-effectively than they otherwise could, with white labeling often providing services such as distribution, marketing, markets support financial, custody, compliance, seed funding and administration. Goldman’s platform, launched last year, currently hosts five U.S.-listed ETFs with combined assets of $3 billion.
“This is an important milestone for our company as we are able to demonstrate the global capabilities of the ETF Accelerator,” said Lisa Mantil, global head of the ETF Accelerator at Goldman Sachs, who welcomed the advantages of the Ucits fund structure, which can be distributed to a larger number of people. more than 80 countries in Europe, Asia and Latin America.
The launch “really cements the fact that we are the only global service provider in the ETF space. This is our first [in Europe]”It will absolutely not be our last,” Mantil added.
“Our intention is to lower the barriers to entry for any investment manager wanting to get into the ETF space. I think we’re going to see a lot more filings, a lot more launches, and it’s global.
The white label market has taken off in the United States, where platforms operated by Tidal Financial Group, Exchange Traded Concepts and Alpha Architect manage several hundred ETFs.
The undisputed European market leader is London-based HANetf, which currently offers 32 ETFs and other exchange-traded products with combined assets of $4 billion. A dozen additional funds are expected to launch in the near future, according to Hector McNeil, co-chief executive officer.
McNeil welcomed Goldman’s arrival on the European market. “I wish we had a little more competition. I want the industry to grow. When you’re the only party, it’s difficult to do that,” he said.
The white label route can be attractive to smaller ETF issuers and new market entrants, who have the choice of building their own infrastructure, purchasing an existing issuer or renting space on a branded platform white.
Some new entrants have instead chosen the acquisition route recently, with Cathie Wood’s Ark Investment Management entering Europe by buy a Rize ETF and Janus Henderson doing the same in pick up Tabula.
However, Mantil said building it yourself could require “a two- to three-year journey” to gather the necessary expertise, while “acquisitions are not cheap. There will be people who say, ‘We want to spend $10 million, $20 million, $50 million to get into the ETF market.’ There will be other people who don’t want to spend that much time and money.”
McNeil argued that the much more developed US white label sector was a key reason why there were some 500 ETF issuers, compared to just 125 in Europe.
He estimates that only about 10 percent of “significant asset managers” in Europe have so far launched ETFs, compared to “50 percent, and almost 60 percent in the United States.”
José Poncela, head of product at Leverage Shares, Europe’s number two with five FTEs on its white-label platform, said its pipeline of potential listings is “getting intense,” something he said is happening across the industry .
“We continue to get requests from everyone, whatever strategy you can think of,” Poncela said, with hedge funds wanting to highlight their strategies in an ETP.
Paul Heffernan, managing director of Waystone ETFs, which is also looking to break into the European white label market, said that “the asset management industry as a whole is increasingly aware of the benefits of the ETF wrapper. Given the complexity of navigating a fragmented European market, the white label business has considerable appeal in the region.”
Poncela, however, said he was “very disappointed, but not surprised” that white labeling is currently much less common in Europe than across the Atlantic.
“The fact that [European white label funds] I haven’t done much, that doesn’t surprise me. Europe is not like the United States. In the United States, reaching $100 million is a little easier than in Europe.
Daniel Willmann, founder and chief executive of Ultramarin, which currently manages $100 million in mutual funds, said the launch, which he said was the “first active AI-based ETF in Europe”, was the core of a family of ETFs he hoped to launch. .
“Over the next five to 10 years, the application and development of machine learning will help humans make better predictions,” Willmann added.