Ireland headquartered corporate governance firm Waystone has launched Waystone ETFs, under the leadership of a newly put together team of European ETF veterans, headed by CEO Paul Heffernan with Henry Glynn heading up capital markets and ETF distribution.
The pair have most of the great and the good firms of the ETF industry on their CVs, most recently Heffernan was at HSBC and Glynn was at ICE, but between them, they have worked with some of the top issuers in Europe, including VanEck, iShares, Source and Vanguard.
Currently, the 800-strong Waystone provides governance, risk and compliance services to institutional asset managers across the liquidity spectrum from alternative investments to UCITS funds. The addition of its ETF platform is “the missing piece of the pie” as Hefferan puts it.
Waystone is an institutional platform operator which Heffernan explains means that it can host investment strategies for institutional asset managers and asset owners in a regulated wrapper.
“We can offer a full spectrum of liquidity solutions for investment strategies all the way through to the ETF wrapper. We are essentially an institutional white label provider, but more than that an open architecture ETF solution.
The firm is on a growth path with around 800 staff currently, which will quickly increase to 1,000 by year end. Waystone is headquartered in Dublin, Ireland with footprints across Europe, the US (offices in New York, Chicago, Miami and San Francisco) and Asia.
“Waystone ETFs will leverage all those capabilities,” Heffernan says. “We offer management company solutions, compliance, tax, capital markets, distribution, a legal umbrella and all the governance that surrounds making an ETF.
“We can immediately plug into that capability as well as all the regulatory provisions, such as the MiFID licence.”
The team at Waystone believes that there are still firms that want to launch ETFs in Europe but who haven’t yet dipped a toe into the water.
“There are managers of significant scale that have been looking at the ETF market and haven’t entered and we believe in our continuous discussions with those companies that an ETF platform offering will allow them access to the European market in a more time efficient and cost-efficient way than going it alone,” Heffernan says.
Glynn agrees noting that that Europe tends to follow the US in the ETF space. While fully transparent active ETFs are currently a feature of the European ETF market, International Organisation of Securities Commissions (IOSCO) recently stated in its ETF Good Practices Report that portfolio transparency can be achieved in different ways, signalling non-transparent ETFs could have a future in the space.
“There are a lot of companies that want to launch but some new entrants would have been deterred by disclosure requirements. Models, such as the Blue Tractor semi-transparent model in the US, allows the authorised participants to have a little more clarity which will give lots of active managers comfort as they don’t want to give away their secret sauce.”
Another growth area for ETFs under the Waystone focus is the conversion of existing strategies into more ESG-friendly vehicles, with Glynn commenting that SFDR and its inclusion of Articles 8 and 9 has got everyone trying to keep ahead of the regulations.
Both Glynn and Heffernan report a warm response from the asset management industry from the US, Europe and the Cayman Islands, with clients who want to take a look at launching an ETF.
Distribution for their new products will be supported by the existing distribution platform within the firm that has eight people in various countries across Europe.
ETF adoption in the UK has not been as rapid as was hoped for but the notable exception has been the digital offerings of firms such as Nutmeg. “The reality is that the virtues of ETFs mean that they are the ideal investment tool for digital distribution,” Heffernan says. “The numbers haven’t lied over the last decade and managers have seen the writing on the wall and don’t want someone else to cannibalise their businesses.”
The firm will also build out its white labelling business in the US, expecting the first wave of growth to come from US managers looking to access the European markets and then hoping that the European clients will want to open in the US.