The innovative US funds that HANetf has brought to Europe
The United States is the world’s biggest market for exchange-traded funds (ETFs). In 2021, the country had a collective $7.19 trillion invested in ETFs.[1] In contrast, Europe has around $1.5trillion invested in ETFs.[2] So it is not surprising that the US is seen as leading the world in terms of ETF innovation and liquidity, being years ahead of other ETF markets such as Europe and Asia.
We believe this can prove frustrating for European investors, following the introduction of MIFID II rules in 2018. These rules effectively banned European investors from purchasing US-listed ETF. As a result, a European investor might read about an exciting new thematic ETF strategy being listed on the NYSE – but due to current regulations, there are unable to invest, unless a UCITS-compliant version is also listed.
However, we believe, the advent of HANetf has made it very straightforward for North American issuers to take their intellectual property and investment strategy and enter the European markets in a timely and cost efficient manner. Part of HANetf’s mission is bringing these exciting new ETF strategies to European investors.
HANetf’s first ever fund was an existing US ETF, EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ) and there have been many more since. We have turned roughly 10 US-domiciled funds into UCITS ETFs and listed across Europe’s largest exchanges, including the London Stock Exchange, Deutsche Borse and Borsa Italiana. The UCITS wrapper is also increasingly popular in Latin America, leading HANetf to list 20 of its products in Mexico City.
The following is a table of HANetf UCITS ETFs that have US & North American sister funds:
Emerging markets and Midstream energy
EMQQ Emerging Markets Internet & Ecommerce UCITS ETF (EMQQ) was HANetf’s first product, launched in 2018. The ETF tracks the EMQQ Index, which seeks to provide investors exposure to online consumption in the developing world. The index includes companies that derive their profits from e-commerce or Internet activities and include search engines, online retail, social networking, online video, e-payments, online gaming and online travel, across emerging markets. Geographical exposure includes India, China, Brazil, Turkey, Nigeria and Indonesia, to name a few.
EMQQ is the UCITS version of the Emerging Markets Internet & Ecommerce ETF, listed in New York, with over $700million in assets under management (AUM). EMQQ Global maintains the index and is a partner for the UCITS EMQQ product. Kevin Carter, the founder and CIO of EMQQ Global, has over 15 years’ experience investing in emerging markets and China and is the former student and collaborator with indexing legend, Dr. Burton Malkiel. [4]
The success of EMQQ led to the launch of FMQQ The Next Frontier Internet & Ecommerce ETF (NYSE: FMQQ). A UCITS version soon followed, being listed in January 2022: FMQQ Next Frontier Internet & Ecommerce ESG-S UCITS ETF (FMQQ). The strategy of the ETF is the same as the EMQQ ETF but with the exclusion of China stocks. By excluding China, investors who already have high China exposure in other areas about to still access the digital consumption in emerging market theme. [5]
Alerian Midstream Energy Dividend UCITS ETF (MMLP) allows investors to access midstream energy companies in North America. Midstream refers to the storage and transportation of hydrocarbons. We believe the sector is highly favoured by investors for its defensive nature due to its fee-based model, the high-income potential (MMLP yields +6%)[6] and the favourable tax treatment of MLPs and the corporate structure popular in the Midstream space.
HANetf created this ETF in partnership with Alerian, with the ETF tracking the Alerian Midstream Energy Dividend Index.
Alerian is a Texas-based company with strong expertise in the Midstream energy space. As of 31 May 2022, approximately 72% of US-listed passive MLP exchange-traded products by AUM tracked an Alerian index.
MMLP can be seen as the UCITS version of the US-listed Alerian MLP Exchange Traded Fund (NYSE: AMLP), which tracks a similar index and has over $5billion in AUM. [8]
Space, airlines and the future of finance
In the summer of 2021, HANetf launched Europe’s first space economy ETF, Procure Space UCITS ETF (YODA). This ETF tracks the S-Network Space Indexes and is focused on companies that derive significant revenue from pure-play space exposure including satellite technologies, space technology and hardware, rocket and satellite manufacturing and operation, and telecommunications, among others.
This ETF was created in partnership with the US-based asset manager Procure. YODA can be seen as the UCITS equivalent of the NASDAQ-listed Procure Space ETF (NASDAQ: UFO), which has almost $70 million in AUM. [9]
During the pandemic recovery, U.S. Global Jets UCITS ETF (NYSE: JETS) came to the attention of many investors,[10] with its AUM surpassing $4billion at one point.[11] Initially launched in 2015, JETS tracks the U.S. Global Jets Index, providing access to the global airline industry, including airline operators and manufacturers from all over the world.
HANetf bought this ETF to Europe, launching the U.S. Global Jets UCITS ETF (JETS), which was Europe’s first global airline industry ETF. [12]
One of HANetf’s more recent listings has been the Sprott Global Uranium Miners UCITS ETF (URNM). The ETF was created in partnership with Sprott Asset Management. Sprott are experts in the uranium space, overseeing a US-listed ETF tracking the same index, the North Shore Sprott Uranium Miners Index, with around $700 million AUM.[13] Sprott also oversees a physical uranium trust with almost $3bn AUM, solidifying their place as world leading providers of uranium investing solutions. [14]
Grayscale is the world’s largest digital asset manager.[15] In February 2022 they listed their first thematic equity ETF, Grayscale Future of Finance ETF (NYSE:GFOF). Grayscale is the team behind the highly popular Grayscale Bitcoin Trust, with almost $15billion in AUM. [16]
The Grayscale Future of Finance ETF provides exposure to the transformative companies are seen as building the digital future of finance. The companies are categorized across three core pillars: Financial Foundations, Technology Solutions, and Digital Asset Infrastructure.
In May 2022, HANetf collaborated with Grayscale to create the UCITS version of this the Grayscale Future of Finance UCITS ETF (GFOF).
Similar but not the same
With other ETFs, there is no direct UCITS equivalent – but there is notably similar products using the same index provider. For example, in the US, the New York-listed Amplify Online Retail ETF (NYSE: IBUY) tracks the EQM Online Retail Index. This is similar, but not identical to, HANetf’s Global Online Retail UCITS ETF (IBUY). The latter tracks the EQM Global Online Retail Growth Index, which notably less US-centric.
In June 2021, HANetf listed the Airlines, Hotels and Cruise Lines UCITS ETF (TRYP). This ETF tracks the Solactive Airlines, Hotels, Cruise Lines Index, providing exposure to global airline companies, hotel businesses and cruise line operators. This index is also tracked by the New York-listed SonicShares Airlines Hotels Cruise Lines ETF (NYSE: TRYP).
On other occasions, North American asset managers have taken their expertise and applied it to a new UCITS ETF. For example, in 2020 HANetf listed The Medical Cannabis and Wellness UCITS ETF (CBDX), in partnership with Canada-based Purpose Investments. The ETF tracks the global medical cannabis industry, which is growing as government’s around the world gradually repeal historic restrictions.
Purpose has prior expertise in this area, overseeing the Purpose Marijuana Opportunities Fund, an actively managed open-ended fund.
Conclusion
While the European market is still smaller than the US, it is a market that asset managers cannot afford to ignore. As Trackinsight noted in its Global ETF Survey 2022, “Investors in the old continent increased the total capital invested in themed funds by +72% in 2021. This is to compare with a +32% increase for America over the same period.”[17] At HANetf we will continue to work with leading asset managers in the US to create UCITS versions of what we believe are the the most innovative and unique strategies.
Want to learn more about entering the European ETF market? Sign up to our webinar where we will be joined by experts from BNY Mellon, London Stock Exchange, RBC Capital Markets, A&L Goodbody and VettaFi to discuss the opportunity and process of entering the European market. Register now.