This isn’t Hector McNeil’s first rodeo. He’s been a leading light of the exchange-traded funds (ETFs) scene for 20 years and involved with four successful businesses in that time, including his latest venture, HANetf.
At ETF Securities he helped take the business from “zero to US$35bn” of assets under management. And he repeated that start-up success to create ETP Management, which then became Boost ETP, which then led to a stint as one of the principals of WisdomTree Europe.
HAN stands for Hector and Nik (Nik Bienkowski is the company’s co-founder and McNeil’s long-term collaborator). And the pair plan to change the landscape for ETFs with its second wave products providing an antidote to the current passive investments championed by the 600-pound gorillas of the industry – companies such as iShares, State Street and Vanguard.
“It also recognises the ETF industry is moving from passive only to add smart beta, thematic, niche and active management into its fold as well,” says McNeil.
HANetf has been set up not as a competitor to the likes of iShares or Vanguard, but as a facilitator, a white-label platform.
“We are looking to build a platform to be a multi-manager ETF platform,” says McNeil. “We will be the first multi-manager platform in the world.”
Eventually, HANetf aims to support 150 to 200 ETFs for around 25 clients who will be “at the top of what they do”, according to McNeil. “They will have IP, content and history.”
Speed and experience are the USPs for the white-label service HANetf is providing, which means it can set up an ETF from scratch in just eight weeks.
It has a fund platform, an ICAV (Irish Collective Asset-management Vehicle), a ready-made board of directors as well as fund operations, legal, compliance, distribution and marketing services.
Spades and shovels
“We provide all the spades and shovels. We are the one-stop solution,” says McNeil. “If you were starting up an ETF from scratch it would probably cost three to five million to get up and running and two to three years and then there’s the three to five years to figure out what you should have got right. Instead of a high fixed cost model, it’s almost a fully variable cost model.
“Our selling points are we have 150 years of European ETF experience between us in our business and that we can get an ETF out in eight weeks which is very hard for any new entrant to replicate”
The winds of change, blowing from the US (where else?), should whip up a perfect storm for the likes of HAN. For McNeil reckons the approval of non-transparent active ETFs by the Securities and Exchange Commission should see a flood of money out of mutual funds and into exchange-traded investments thanks to the latter’s tax advantages. The US is roughly a ratio of 40%/60% passive to active whereas Europe is 10%/90%.
“What happens in the US, will happen here,” McNeil says of the potential switch from traditional pooled investment to ETFs. “ETFs are simply better tech to mutual funds.”
In the meantime, HANetf is focusing on rolling out new products as it creates its production line. It has helped create seven products covering technology and healthcare megatrends and emerging markets as well as gold and cannabis.
The latter is Europe’s first medical cannabis ETF, managed by Canada’s Purpose Investments, an expert in the sector that has C$8bn under management.
Making a mint?
It has teamed up with the Royal Mint, meanwhile, to provide a gold exchange-traded commodity (ETC) that allows an investor to swap the security for physical gold.
The long history of the Mint, allied to the fact that it isn’t a bank holding physical gold (therefore allowing a true hedge against the financial system), marks the ETC out from the field as “really adding value”, McNeil says.
“The Royal Mint’s not a bank or a financial institution; it is 1,100 years old and has survived the Black Death, a civil war, two world wars Spanish Flu and now coronavirus – coronavirus looks pretty easy,” he adds.
Founded in 2017 with inaugural products out late 2018, HANetf has made a strong start to date. It has almost US$300mln of assets under management, “which will be the fastest we’ve ever achieved that landmark in any of our other business”, says McNeil.
10 interesting ETFs a year
The plan is to partner up with the best or most interesting fund managers to create a base of 10 interesting ETFs a year.
“We won’t be offering the normal ETF story of the Eurostoxx 50 at two basis points cheaper than the last guy,” says McNeil. “Our products aren’t cheap, but they are interesting and provide value add.”
He, co-founder Bienkowski and the team are initially listing ETFs on the bourses of London, Italy, and Germany, but they will look to spread their wings internationally as the business grows. The next market looks likely to be Switzerland.
The founders’ reputation has allowed the company to hit the ground running, while their track record and the business blueprint have attracted some high profile and influential cornerstone investors.
Included on the shareholder register are billionaire hedge fund manager Steven Cohen, founder of SAC Capital Advisors and latterly Point72 Asset Management, and Blake Grossman’s Third Stream, who was CEO at BGI when it set up iShares.
The “delicatessen” approach
So, what did they like about the HAN model? McNeil reckons they liked his “delicatessen” approach to ETFs.
“Other ETF issuers are like Wal Mart. You can turn up and buy a rubber dinghy, pair of ladders, or a water gun,” he explains.
“They won’t be the best products, but you turn up there and you know you can get them.
“We want to be the Wholefoods; the delicatessen, higher fee, lower competition-type products. Thematics will be a big play for us. But we’ll also have smart beta and active [ETFs] across the whole chemical table of investment strategies.”