HANetf goes from strength to strength with plans to open in the US in 2022
Hector McNeil, HANetf co-founder, has confirmed that the London-headquartered firm intends to open in the US in the first half of next year, offering their white label facility to ETF issuers from outside the US, who want to launch ETFs into the country.
The firm has had quite the year, growing its asset base, at one point, to over USD2.6 billion, at the height of the cryptocurrency boom, and even now its asset base is close to USD 2 billion with 23 funds.
“We launched our first fund in November 2018 and had just USD70 million in assets by the start of 2020,” McNeil says. “It’s been a pretty meteoric rise, almost more than the start of ETF Securities where Nik and I were also co-founders.”
McNeil and his fellow co-founder Bienkowski have a shared history of firsts and successes in the ETF space. The business currently focused on the popular thematics sector, reflects an outing of their ideas back in 2008 when they were pioneers in the thematic space, with ETFx (a subsidiary of ETF Securities), that became Canvas, now owned by LGIM, with a range of thematic ETFs focused on water, clean energy, shipping, gold mining and coal. “We were the first but we were too early,” McNeil says. This time, thematics have been dominating ETF issuance and performance for the past year.
“The great thing about thematics is if you think about normal investment products, they are complicated and take a lot of explaining to end investors, for example factor investing like value or growth, not the investors. But everybody has an opinion on mega trends, professional investors to retail, so it’s a good way for retail investors to express their convictions in their portfolios,” McNeil says. “It gives them the stories.”
Each of the HANetf ETFs has a detailed monthly report giving investors access to the story behind that ETF, similar to an active manager’s monthly report, which McNeil says, as far as he knows, makes them the only large-scale ETF firm to provide this content service.
And the number of ETFs HANetf will have launched is set to be 27 by mid-September, with a minimum annual target of roughly 10 launches a year, beaten this year with 15+ launches by mid-year already, and an ultimate target of 150 products for 30 managers and being the first multi-manager ETF platform globally.
“The tyres have been well and truly kicked on the business,” he says. “We have gone through profitability in just over two years and we are a year ahead of where we expected to be which is great.”
McNeil estimates that he and Bienkowski have launched or been involved with the launch of over 550 ETFs/ETPs and add in recent hire Manooj Mistry’s experience, who has also launched around 450, HANetf leadership has developed a grand total of approximately 1000 ETFs, a large portion of the 7,000 issued globally, which, as McNeil says, gives them plenty of experience.
“We were quite sure that the HANetf idea would be a solid one, as there was a need out there for a quick and efficient way to enter the ETF market without huge fixed cost investment,” he says. “But obviously the idea isn’t the only thing, execution is equally important and most ETF businesses in Europe are already part of a bigger company with compliance, sales and marketing and so on, but we have intimate knowledge of what it takes on day one to get through the various stages which is what we ultimately sell to asset managers who want to work with us.”
Since their launch, the markets have been a little kind with the growth in demand for thematic ETFs, although McNeil believes that it is important to have a diversified offering. “We have a deliberately heavy emphasis on thematics initially, with the most diverse and growing thematic range in Europe,” he says. “But the market did swing from growth to value earlier this year and in some ways is going back the other way but with these long-term mega trends, it shouldn’t matter as they should be hugely successful over the longer term.”
HANetf was the first to market with a number of themes, including medical cannabis, space, solar, cloud, 5g connectivity and distributed renewable energy to name a few. They were also the first to launch a 100 per cent responsibly sourced gold with their Royal Mint Physical Gold ETC.
“Being first to market means you can often capture the investor’s imagination and be the go-to ETF for that theme and that’s why we always try to add value with our products rather than offer the ‘me too’ scenario where you are competing on price or whatever the story is. That’s usually the go to story if you are second and third to market.”
The big story this year has been the rise of the cryptocurrency ETP market and HANetf’s BTCE has done particularly well in terms of raising assets and making a significant contribution to its rise in assets under management.
“BTCE is pretty consistent with what we have done in the past with being first to market with gold or short and leveraged commodities or smart beta at WisdomTree,” he says. “It’s a robust market leading product including all the bells and whistles with redemption physical delivery of cryptos for end investors and the investor take up has been fantastic, creating the most liquid Bitcoin ETP available and investors feel confident they can get in and out of the product at fair value. We are really pleased with what’s been achieved by ETC Group and HANetf and, at its peak trading, BTCE was the most traded ETP/ETF in Germany for a good portion of the end of last year and first part of 2021, which proves you can put a coherent and robust product together in the crypto space.”
The UK’s FCA has banned UK investors from investing in the regulated, listed crypto ETP sector.
“I can understand them getting nervous about the volatility in the crypto markets,” he says. “What is naïve is to think that by banning crypto ETPs, the investor won’t find another way of accessing the crypto markets which is less regulated and less robust. This effectively means that you are leading investors to the wild west of the unregulated crypto markets while a crypto ETP is a regulated product, traded on a regulated exchange accessed through a regulated broker.”
McNeil points out that the ‘know your client’ rules mean that any stockbroker or adviser has to make a judgement that an investor has the knowledge to buy a regulated product on an exchange. “Most wouldn’t let their investor clients do that if they felt their knowledge wasn’t sufficient” he says.
In terms of an ideal asset management client for HANetf white label platform, McNeil says it is companies with good intellectual property and content already established, with a fantastic track record and something slightly different to offer in the ETF space.
HANetf’s latest launch focuses on ESG, the other big story of the year, with the HANzero range, designed to offer carbon neutrality to each product. The first one is the Zero ETF, based on the S&P Clean Energy index, as used by the iShares Clean Energy ETF which has raised a great deal of money.
The HANetf version invests in the S&P Clean Energy index, the same index that underpins the iShares ETF, and they then calculate the carbon impact of that investment and buy carbon offset projects to neutralise the carbon impact. The cost of the offsetting is taken out of the TER, so it runs at no extra cost to the end investor. They also get the full beta of the index and its 10bps cheaper than the iShares’s product, at 55bps TER v 65bps for iShares.
“At HANetf we believe HANzero will be as impactful as currency hedging,” McNeil says. “One of the fundamental gaps in ESG investing is that even if you buy a low carbon ETF it will still have a carbon footprint and most companies aren’t aiming for carbon neutral until 2050 which most investors think is too late and they want to take some action now. They also expect their product providers to come up with innovative solutions and we believe HANzero is one such solution and carbon offsetting could become the norm.”
The HANzero range uses sustainability consultants South Pole to source its offsetting projects and is currently invested in scalable projects including a windfarm project in Indonesia and a reforestation project in New Guinea.
Any HANetf ETF with the HANzero name will be part of this initiative, with Saturna Capital and HANetf launching the second HANzero product this week, with the Saturna Sustainable ESG Equity HANzero UCITS ETF (SESG) ‘SESG’.