Chief Executive Officer & Founder
ETF Managers Group
How does a private label service like ETF Managers Group work?
ETF Managers Group is unique in that we have all of the approvals necessary for our clients to launch exchange listed ETFs. So we have all of the legal work in place, all of the SEC approvals (these are referred to as exemptive relief), we do all of our own portfolio trading in-house and we have a dedicated wholesale force. So for anyone interested in listing an index or an active ETF, we actually can do 100% of the services required, and we build the ETF in their name which is why our tagline is “Your ETF, Your Way” at ETF Managers Group.
How are you different from other private label services?
ETF Managers Group is the only firm in the world that offers the full level of services necessary to launch and manage an ETF. That includes in-house compliance, portfolio management, financial reporting as well as wholesaling.
We also can list and manage all three ETF wrapper types – so both passive and active 40 act funds as well as exchange traded products, which are funds that have either commodities or futures base.
How much does it cost clients to launch an ETF with ETF Managers Group versus on their own?
That's one of the great benefits to come to a firm like ours. If someone wanted to launch their own ETF and manage their own services, they’re typically looking at about three years’ worth of work and approximately $5 million to set it up. At ETF Managers, because we are in the ETF business and we have all of the service providers and all of the relief necessary from the SEC, we typically can have an ETF out within 75 days of its filing with the SEC, and the cost for that is about $75,000. So it really is a tremendous cost and time savings for all of our clients.
Who is your biggest competitor in the white label space?
It’s an interesting question. I always look at the business that we built at ETF Managers and say that we really don't have any competitors. There other firms out there that do portions of the services we offer, but we are the only firm that offers the entire turnkey level of service including portfolio management and wholesaling, so we really are without any competitive services out there.
If an ETF fails, who is on the hook: ETF Managers Group or your client?
Sure when an ETF fails - and typically ETFs fail because they lack the ability to receive the necessary assets required to run the fund - ETF Managers Group, along with our Board, make a decision that the fund really did not find enough investors to really justify its existence. We look at our ETFs as all of our children – we want them all to succeed. But the reality is not every one is going to work, and part of our job as an issuer and ETF professional is to evaluate those funds that really are not gathering interest from investors and assets, and then systematically close them and return to the investors’ their initial investment.
How does it feel to be on the floor at the New York Stock Exchange and ring the Bell?
We’re very excited to be here for the launch of the whiskey fund with ETF ticker WSKY. It's the first ETF that gives people exposure to the global business around whiskey distilled brown liquors which has been a very interesting area for people to invest in as its seen tremendous growth over the last several years.
This is an amazing experience! And I’m very proud as the founder of ETF Managers’ Group to be a part of it.
President & Founder
ETF Managers Group
Please introduce yourself.
I'm president of ETF Managers Group. Sam Masucci and I are the founders and owners of the company. We have different backgrounds. I'm on the legal side – I've been involved in ETF industry a long time. I wrote the prospectus for the original Barclays shares so I’m one of the pioneers.
You have 14 ETFs on the market today. HACK is larger than the other 13, which have combined assets of about $40 million. Is the fact that you have a lot of smaller funds a concern?
Actually our combined assets of those funds is probably closer to $100 million dollars now. And maybe that's a good way to answer the question -- because two of them actually a year ago in December were each at $2 million dollars. One went to $120 million dollars this year and it's down to about $60 million dollars – it’s a cyclical play on silver. Another one is more of a secular play – iPay, a mobile payments fund – that all of the sudden got some attention - which is what happens you know to make something go - and went from $2 million dollars to $50 million dollars in three months or so.
So really, to put that in a big picture, is that you don't know what's going to move a fund, and you have to give it enough time. Some ideas aren’t going to make it but that many good ideas just need enough time.
What is the biggest challenge to gaining traction with a new fund?
You know…funds get traction at different times for different events. For example, you may have heard the story about HACK, our biggest success. It came out as a cybersecurity fund. It actually was an idea that had been taken to a couple other firms that weren't interested. All of the sudden, it came out the week of the Sony picture hack and the North Korea thing, and the idea gained global credibility and went to $1 billion in less than a year.
So that's the kind of thing that you dream about but many things happen like the mobile payments that I was just talking about it. It hasn't gone in that sort of trend, but if they’re going in a steady trend upward or if events come their way - like we have a rising rate interest fund that started to gain traction now. Sooner or later we knew rates were going to go up, but now it's finally happening but you have to be patient enough to give every idea chance.
How do you determine if a client’s investment strategy is viable to employ in an ETF?
You know, there are a lot of different factors there. Some of them are easy to throw out because it’s just fun to talk about but really not going anywhere. But at the same time, ideas gain traction at different times for different places and it's hard to predict the future – so, you know, we say to a client if you have a long-term belief in this, and a track record, and you're willing to financially back it and partner with us, then we’ll give it a reasonable period of time to see if a combination of market events and global events and maybe good luck and serendipity sort of take it to the right place.
Any tough lessons along the way? Any advice for those considering entering the ETF space?
It's not the easy space that it was 15 years ago. Or, actually, having been around then - it wasn't easy then. It's like the market – it takes off at different times and then sometimes stabilizes. There's some thought that the best ideas have been picked over now. I don't agree with that at all. I think there's always going to be new investment ideas that are going to come out.
I think the low hanging fruit has been picked by the major firms in terms of core investment strategies but there's a lot of satellite strategies (or niche strategies or whatever you want to call it) that customize a portfolio that are constantly being developed. We get calls from people at hedge funds in places like that all the time - you have ideas that are very interesting that, you know, we give a robust analysis to.
Looking ahead, what are some of the trends you’re seeing in terms of product development in ETFs?
The trends we’re seeing in product development in ETFs are - I would say numerous - it's hard to say. What we've sort of specialized in is specialized equity…taking sector funds to another level like cyber-security and our whiskey and spirits fund, and things like that…which are nichier than a sector fund but much more broad and risk-reducing than a single security. So we think there’s a place for them in people's portfolios.
There are some interesting ideas going on around leverage right now especially as the regulatory climate changes the SEC may tighten up the rules on leverage funds and so were watching that space carefully. There’s some interesting strategies going on regarding emerging markets and currencies and, you know, one of the fun things about the businesses that we know what we have a catbird seat in terms of some of the more interesting investment ideas and we try to work with our partners on whether they're worth taking into a public product.
How does it feel to ring the Bell at the New York Stock Exchange?
Well it feels great to be here at the New York Stock Exchange today. We’re in the Siebert room today, and I actually was lucky enough to be friends with Mickey Siebert many years ago and she would just love the fact that she is honored at this place right now because she protected her legacy and she made it grow to what it deserves to be. So it's great to be here.
Listen to Co-Founders Sam Masucci and Barney Karol Describe How to Quickly Launch an ETF