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Tidal eyes up European expansion  

Recently united as one company under the Tidal Financial Group name, and also recently refinanced by FTV Capital, the firm represents multiple ETF-related brands including Toroso Investments, Tidal ETF Services and Toroso Asset Management.

Tidal also won Best US White Label Platform in the recent ETF Express US awards. Mike Venuto, CIO of Toroso Investments, says: “The great news is the merger and going under one name.  Having the investment from private equity firm FTV Capital is very good for us and a good support for our business.

“It gives us an opportunity to have better technology and a larger head count and at our recent offsite in Chicago it was good to see all the new people in the team. Makes us more comfortable in this market situation where the dollar equivalent for all the same management fees has decreased because the market has been down.

“It gives us muscle to be comfortable and to be selective.”

The firm has seen USD300 million of net inflows this year across all the 55 ETFs that they service.

The firm has had a European outpost for a while, registered in Ireland as a provider of  portfolio advisory management services, having conducted the trading for European white labelling firm HANetf’s EMQQ, Frontier and Mexican bond products.

Venuto says: “We brought Telmo into the firm in a consulting role to support sub-advisory services, to help us as a relationship manager and also to find a strategy of how we can expand in Europe.”

Madrid-based Telmo Rueda, director of EMEA, gives a snapshot of the appetite for ETFs from Spain, which has seen low take up as there exists a tax advantage for UCITS mutual fund holdings in Spain – investors can move between mutual funds and not realise a capital gain.

“Spain is a delicate situation for retail investors,” Rueda says.  “The tax advantage promotes the philosophy of investing for a long term but keeps investments in mutual funds.”

He adds that three years ago, there was an initiative to extend the tax advantage to UCITS ETFs as well, which did not move forward apparently due to lobbying by providers of mutual funds.

However, Rueda says that investments in ETFs are increasing slowly through retail investor groups, particularly during Covid by investors who have wanted to trade in product lines only available through ETFs, such as short and leveraged products or cryptocurrencies.

Rueda notes that Spain also still has the trail fees system for mutual funds with rebates that disincentivise intermediaries from selling ETFs and it appears that no one is challenging the status quo in Spain. Rueda says that the big ETF firms are not lobbying with regulators for change as they have mutual fund business to protect as well.

Venuto says that his firm continues to explore new opportunities with HANetf and notes that European investors have a strong appetite for cryptocurrency products. “We have a focus on trading and execution and reconciliation in cryptos in Europe,” Venuto says. “We have built it for equities, bonds, futures and bitcoin futures and I think that the best chance of making a splash is in adding that crypto infrastructure in Europe.”

Venuto is not daunted by the crypto winter, seeing it as an opportunity to buy.

Rueda says: “We see Europe as potentially a marketplace but the differences in terms of distribution, segregation and liquidity across so many different marketplaces and venues makes it very challenging.”

He comments that the trading part of the ETF is not very well understood across much of Europe. “Financial advisers here do not understand how critical the trading part is,” he says.

“If an asset manager decides to launch an ETF they need a trading team that is experienced and has good connections with local brokers.”

Venuto says that Tidal can partner with HANetf to launch a product for one of its US clients into Europe and equally support a European asset manager who wants to be in the US.

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