European ETFs To Reach $1tr In 2019
Assets in exchange-trades funds listed in Europe will reach $1 trillion for the first time next year according to Hector McNeil, co-chief executive and founder of HANetf.
McNeil spoke at the annual ETF Investment Outlook Conference held at Grant Thornton in London last week.
He said: “Last year was a real milestone for European ETFs as they grew faster than US for the first time. Assets have reached just over $800bn (€654bn) and next year will hit $1 trillion as the market is firing on all cylinders.”
ETFs and ETPs listed in Europe increased by 40.1% last year to reach a new high of $802.4bn in assets under management according to ETFGI, the independent research and consultancy firm. In contrast the US market grew by 34.3% last year.
McNeil continued that the US market is 10 to 15 years ahead of Europe. In the US last year there were about 80 ETF issues from start-ups while in contrast, in Europe most ETFs are issued by banks or asset managers.
In the US there are white label firms who provide services to new issuers in the ETF market. McNeil and Nik Bienkowski have launched HANetf as Europe’s first independent third-party provider of services for asset managers as the region has different tax regimes and languages in each national market. The business recently completed a seed funding round including investors such as Peter Thompson, co-founder of Source ETF, and Point72 Ventures, the early-stage venture capital strategy funded by Steve Cohen.
“Of the top 120 asset managers in Europe, only nine have an ETF solution,” McNeil added. “There are no acquisition targets left so they will have to build a business.”
He continued that HANetf lowers the barriers to entry and can decrease the time to launch a product from the current 24 to 36 months to 10 weeks.
“We are having an amazing number of discussions in the active space, especially in fixed income,” said McNeil. “Alliance Bernstein recently launched two ETFs to express their research views and that is an option for other research houses.”
In October last year Bernstein said it was launching a pair of ETFs which track the firm’s US Research Index and Global Research Index respectively. They include stocks that are rated “outperform” by Bernstein’s research analysts, and are highly rated in the firm’s quantitative alpha model.
Robert van Brugge, chairman and chief executive of Bernstein, said at the time: “With these ETFs, investors can access our insights directly at a competitive price and in a convenient format.”
McNeil said growth in Europe will also come from ESG funds, thematic offerings e.g related to blockchain or self-driving cars and smart beta products. Smart beta ETFs do not track standard market cap-weighted indexes, but instead use indexes weighted towards factors such as low volatility or dividend yield.
He predicted that mutual funds will become legacy products within 15 years due to the growth of assets in European ETFs as all active strategies, except illiquid assets such as real estate and private equity, will be available in an ETF wrapper.
Goldman Sachs Asset Management’s fundamental equity business manages over $20bn in thematic equities.
Data extraction and integration is the second stage of a digitization process.
With Ankit Mittal, Business Change Manager, Global Trading, Schroders
IIGCC and lead investors will launch a pilot with companies including BP, Eni, Repsol, Shell and Total.
Dimensional Fund Advisors entered the ETF market last year with