Failure was not on the menu when Goldman Sachs first unveiled an ambitious plan a lucrative new stream of business with ETFs.
Launched in November 2022, the Goldman Sachs ETF ‘Accelerator’ was designed to help clients bring their ETF ideas to market quickly and efficiently. But the white-label platform, which employed just under 100 full-time staff at its peak, survived less than three years.
Its fate was effectively sealed in December 2024 when an untimely leak a possible sale cast major doubt on its future, a revelation that surprised even senior employees of the platform.
ETF Stream can reveal that State Street carried out a due diligence exercise with a view to buying the Accelerator. But the platform was wound down May after no deal materialised and Goldman failed to find another buyer, an ignominious defeat for the Wall Street giant.
This account, based on interviews with employees of the platform, wider Goldman staff and clients that interacted with the service, tells the inside story of the ETF Accelerator’s premature demise.
An 'Institutional-Grade' Solution
Around 2020, with hype growing around ETFs, Goldman Sachs began receiving queries from top institutional clients: Should we launch ETFs? How would we even do that? The ETF Accelerator platform – a white-label service that enabled clients to ‘launch, list and manage’ their own ETFs – was borne out of that demand.
The idea of white-labelling, a term Goldman always distanced itself from, was borrowed from the mutual fund industry where service providers realised they could operate as ‘turnkey’ solutions – handling the fund setup and operations so the asset manager could focus on investment strategy and distribution.
The model found a natural home in ETFs to the particularly complex operational requirements of the wrapper.
Goldman Sachs was not the first to identify the opportunity, but it felt it could offer something different to the existing competition: a truly institutional-grade service.
“The goal wasn’t just a white-label solution – it was to create a fully interactive digital experience,” said one Accelerator employee.
The vision included a state-of-the-art technology platform – never quite finished – that would allow clients to manage their strategies, model tax implications and perform other bits of sophisticated analysis, all synced in with the firm’s trading desks for execution.
The plan was taken to Goldman’s executive committee who signed it off as a five-year strategic initiative – a birthday it never managed to reach.
Some ‘Barely Knew' What an ETF Was
The approach to building the Accelerator team was go big and go fast. Under the stewardship of global head Lisa Mantil and COO Steve Sachs, a dedicated global team of 75 employees was established the outset spanning everything from operations to compliance to trading and technology. The team swelled to just under 100 at its largest, including around 60 engineers.
Most of the staff were sourced internally; some from its asset management division, others from different areas of the bank. This included its European leadership: EMEA head Rebecca Anderton-Davies and EMEA COO Jurgen Blumberg.
For new employees of the Accelerator, the promise of a ‘start-up feel’ within a large organisation was an exciting draw. But there were also nerves. Not all new initiatives incubated within Goldman went on to fame and glory. Indeed, digital banking platform Marcus was starting to run into well-reported difficulties around this time – an ominous parallel not lost on new staff.
Since a large team had to be cobbled together in the interest of speed to market, there were pockets of inexperience.
“While some employees were ETF veterans, others barely knew what an ETF was. The challenges were mostly in the middle and lower layers – where people from very different backgrounds were figuring out how to coordinate the various pieces of the operation. That made execution challenging,” said one former employee of the firm.
“In hindsight, the platform should have started with a fraction of the people it ended up hiring. If Goldman had taken a leaner approach early on, I think it could have worked,” reflected another.
One staffing misstep was the ‘portfolio implementation’ team, located in Paris. Its imagined purpose was to offer outsourced portfolio management services to clients, but this structure was rejected due to complications around Goldman’s different European entities post-Brexit.
As hires had been made, the team was quietly repositioned as an execution-only portfolio implementation unit. This arrangement was acceptable to Goldman’s legal and compliance teams but superfluous to many of its natural clients – institutional managers that already had trading capabilities in-house.
“We emphasised the value of combining capital markets and trading services, but most clients just wanted capital markets support, a function they didn’t have internally,” explained one former Accelerator employee.
But capital markets, the crucial function which liaises with liquidity providers to ensure an ETF’s smooth trading, proved another weak spot in Europe, said one person familiar with the matter.
Goldman initially tried to hire an experienced capital markets executive. But after delays and complications, the candidate withdrew and joined another firm. This meant Goldman needed to hire someone “urgently”. The vacancy was ultimately filled by another Paris-based employee without a clear ETF background.
“Capital markets is best thought of as a triangular function – a bit of trading, a bit of sales and a bit of operations. It’s essential to have expertise in all three. I think it was important they hired someone with that expertise. It felt a big ask for someone [inexperienced] to figure everything out on the job,” the person said.
Although COO Blumberg was a capital markets veteran, his day-to-day focus was on developing new business from the London office, another employee of the platform confirmed.
High Fees, Near Misses
To justify the upfront investment in people and technology, the Accelerator platform launched with a fee level that was “by far the most expensive in the market,” according to one former employee.
“Our pricing made it almost impossible to launch a passive ETF; the economics only worked for active strategies with a higher fee structure,” said another.
That proved a lower hurdle in the US where clear tax advantages were driving a boom in active ETFs: Brandes was signed as the Accelerator’s first client in October 2023 followed by Jeremy Grantham’s GMO in November and then Eagle Capital Management in early 2024.
But in Europe things went eerily quiet. Although Lisa Mantil told ETF Stream in September 2023 she was very hopeful maiden products in Europe would be live by the end of the year, no announcement came. The sole European client – German quant manager Ultramarin – eventually launched its first ETF nine months later.
One issue kept blocking progress for the Accelerator: the fees.
Fideuram was a long-standing Goldman client and the giant Italian wealth manager wanted to launch an ETF range via the Accelerator. But after months of work, Fideuram decided that the white-labeller was simply “too expensive,” an employee of the Italian firm told ETF Stream.
The wealth manager opted to partner with State Street instead, announced in September 2024, has since built an ETF suite with assets of more than $6bn, according to Tackinsight data.
The painful loss of Fideuram to a rival triggered a period of internal soul searching about the Accelerator business model. The uncertainty was compounded by the subsequent departure of EMEA head Anderton-Davies to Barclays.
“We clearly overestimated what clients, especially in Europe, were willing to pay given their own cost pressures,” one employee reflected.
Goldman responded by halving the Accelerator’s fees in Europe and continued to reduce them in a bid to become more competitive. But the large upfront investment and high ongoing cost base meant some prospective managers had to be turned away.
“Although the people and quality of service were excellent, my impression was that their pricing was just too high,” said one active manager who interacted the Accelerator.
“[The fees] might have been justified for very sophisticated, complex ETF strategies but not for something simple and transparent. In the end, it just felt like the economics would have been very hard to make work.”
Unfortunately for the Accelerator, specialised active strategies were a nascent segment of the ETF market in Europe yet to develop meaningful demand, either from hopeful asset managers or their end investors.
Right Idea at the Wrong Time?
Momentum did eventually build at Goldman Sachs’ ETF Accelerator in Europe. Demand began to pick up and a few potential clients were progressing to the latter stages of negotiation. But it was at this stage the platform’s future was thrown into jeopardy by the December 2024 leak about a possible sale.
And although State Street seriously considered buying the Accelerator – State Street declined to comment for this story – when no buyer could be found the platform shut up shop and its five clients and 14 ETFs were shifted to a new set of service providers.
The majority of staff that wanted to stay at Goldman were found new roles, according to a person with knowledge of the matter, but some redundancies were unavoidable. Lisa Mantil, the former global head of Accelerator, is still employed by the firm. Global COO Steve Sachs retired while Jurgen Blumberg joined a tokenised fund specialist Centrifuge.
The decision to close the Accelerator platform was part of a top-down refocusing of Goldman’s operations, said Nick Carcaterra, spokesperson for Goldman Sachs in response to an email from ETF Stream.
“As a firm, we narrowed our focus over the past few years and our priorities are to continue to grow our leading global banking and markets franchises as well as our asset and wealth management divisions,” he explained.
The ETF Accelerator clearly falls outside of these core segments. But the heavy upfront spending on staff and technology in an inherently low margin business it towards a nascent segment of the market – active managers with sophisticated IP. This made it impossible to deliver the required return on Goldman’s investment, at least for some time to come.
Some observers will prefer to remember the Accelerator platform as the right idea at the wrong time, closing its doors as the active ETF goldrush was gathering pace.
“We built a business with the ETF Accelerator with a clear client demand. Goldman Sachs was just not the best long-term home for it,” Carcaterra said.
By Toby Lawes
Originally published on ETF Stream
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