Just a day after InvestorDaily revealed Betashares’ plans to launch two new exchange-traded funds (ETF) targeting products from global giants, Arian Neiron criticised some of VanEck’s peers for allegedly blurring the line between acting in clients’ best interests and pursuing their own profits.
Specifically, the CEO alleged that certain firms operating both ETFs and model portfolios are swapping out rival ETFs in favour of their own products within these portfolios.
While the practice of internal substitution is not uncommon across the industry, replacing high-performing third-party funds with in-house products has raised questions around transparency and potential conflicts of interest.
Speaking to InvestorDaily, Neiron questioned whether fund managers using model portfolios as funding vehicles for newly listed strategies are genuinely enhancing the client-value proposition or simply engaging in a form of vertical integration.
“A lot of our clients have queried the motivation of some of our peers that have been utilising their own investment strategies for their managed accounts,” Neiron said.
“It is no secret that many fund managers who have model portfolio/managed accounts utilise these as funding vehicles for new strategies they list, particularly after they have been allocating to an external fund manager.
“One must consider if such an approach is additive to the client-value proposition, or more something that aligns to pseudo-vertical integration.”
According to Neiron, speaking from the perspective of a private firm with a heritage of over 70 years, “we think that a number of ETF launches over the years have raised a few eyebrows”.
“We reinforce that we are committed to empowering our client’s portfolios, not competing with them,” he added.
Unlike VanEck and Global X, Betashares, Vanguard and BlackRock offer both model portfolios and ETFs to the market, giving them control over both the product and asset allocation decisions.
Global X’s Marc Jocum said while these firms often include their own funds in model portfolios, concerns emerge when a provider claiming to be “best in class” – and asserting the use of independent research and an open-architecture approach – suddenly replaces a third-party ETF with an in-house product.
Such moves inevitably raise questions around objectivity and investor outcomes.
Speaking to InvestorDaily, the senior product and investment strategist said: “I’d say for most managed account providers who are issuing particular products, probably most people would expect under the hood to see those issued by that particular product manufacturer at the end of the day.”
The ETF industry, Jocum said, is all about “winner takes most” and asset gathering, adding that “most ETF issuers want to be in the business to be solutions that can tailor towards any client need or any asset class”.
With managed accounts/model portfolios gaining traction among financial advisers, providers, he said, want to grow their slice of the pie.
“I wouldn’t be surprised if most ETF issuers that have managed accounts, most of them would have their own ETFs in there, the only ones they wouldn’t have is if they have an asset class that they don’t have exposure for at the moment, and they are almost forced to use another one,” he said.
“If there was an issue, it would only be around how it’s marketed.”
While it’s fairly accepted that ETF providers offering model portfolios may use their own funds, there is broad consensus that such decisions must be guided by fiduciary duty and transparency.
If done primarily to favour in-house products, not only is reputational damage a given, but regulatory scrutiny is not excluded.
InvestorDaily contacted Betashares for comment, but the firm declined to respond by the time of publication.
On Thursday, regarding its impending ETF launches, a spokesperson for the firm said: “We’re planning to expand our range of core building block exposures over the second half of 2025.
“These planned additions to our growing range of innovative and cost-effective exposures will allow investors and their financial advisers to build and complete more of their portfolio with Betashares.”
