ETF Managers Group and PureFunds in partnership dispute

Aug 1st, 2017 | By | Category: ETF and Index News

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White-label ETF platform ETF Managers Group (ETFMG) has changed the names of six ETFs within the ETF Managers Series Trust, rebranding the funds ‘ETFMG’ following a dispute with the ETFs’ original partner PureFunds.

Andrew Channin, CEO of PureFunds

Andrew Channin, CEO of PureFunds

The funds in question offer a range of thematic equity exposures and include the commercially successful PureFunds ISE Cyber Security ETF (NYSE Arca: HACK), which holds more than $1.1 billion in assets under management.

ETFMG claims that PureFunds violated certain agreements which forced ETFMG to terminate the partnership. The details of these violations were not specified and PureFunds is contesting the termination.

Andrew Channin, CEO of PureFunds, commented in a statement: “ETF Manager’s Group, LLC and ETF Managers Trust terminated NASDAQ and PureFunds interest in the “PureFunds ETFs”. PureFunds has filed suit against ETF Managers Group, LLC, the ETF Managers Trust and their principals, including Samuel Masucci and Barney Karol, Esq. before the Superior Court of New Jersey, Union County to address the termination.”

A statement from ETFMG said: “Contrary to some published reports, Andrew Chanin of PureFunds did not originate the idea that became HACK. He was engaged by Kris Monaco, the head of the ISE ETF Ventures group at the time, to help ISE bring its ideas to market. At a board meeting in April of this year, the board tasked with overseeing HACK approved a reduction in the fund’s management fee from 0.75% to 0.60% effective 1 May 2017, in a move meant to benefit shareholders and better align the fund with its competitive landscape. Also on 1 May 2017, Mr. Chanin initiated legal action against ETF Managers Group challenging the fee reduction. The same court has twice rejected his claims in hearings on the matter.”

The new names of the rebranded ETFs are as follows:

ETFMG Prime Cyber Security ETF (NYSE Arca: HACK)
ETFMG Prime Mobile Payments ETF (NYSE Arca: IPAY)
ETFMG Prime Junior Silver ETF (NYSE Arca: SILJ)
ETFMG Video Game Tech ETF (NYSE Arca: GAMR)
ETFMG Drone Economy Strategy ETF (NYSE Arca: IFLY)
ETFMG ETFx HealthTech ETF (Nasdaq: IMED)

Three of the ETFs, HACK, IPAY and SILJ, will also track new indices created by Kris Monaco’s new indexing firm, Prime Indexes.

According to ETFMG: “Kris Monaco and Prime Indexes, his new company, are providing the new indexes. Kris is the originator of the ideas that became the PureFunds family of ETFs, including HACK. Once this takes effect, the PureFunds brand will no longer be associated with the ETFs in question.”

While the outcome of the terminated partnership will likely be decided in court, the dispute raises questions for firms looking to launch ETFs through the use of a white-label provider.

As reported by Heather Bell over at ETF.com, Christian Magoon, CEO of Magoon Capital and Amplify ETFs, said of the split, “This is the first white-label provider I’ve aware of that has terminated the firms who developed the investment idea, index and had economically supported the products in question. This should give serious caution to any firm considering a partnership with a white-label provider as reputation is key.

“While this termination is being disputed, Friday’s news stands as a great loss to Nasdaq and PureFunds as it stands today.”

ETFMG previously announced the closure of the PureFunds Solactive FinTech ETF (Nasdaq: FINQ) and the PureFunds ISE Big Data ETF (NYSE Arca: BIGD), which ceased trading as of close of business 31 July 2017 (See: “ETF Managers Group, PureFunds to close big data and fintech ETFs”).

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