Europe's Upstart ETF Market Makes Some Strides
09 April 2018 - 12:30PM
Dow Jones News
By Tanzeel Akhtar
The European appetite for exchange-traded funds, though well
behind that of investors in the U.S., continues to grow. New
products and the entry of new categories of investors have been a
boost, experts say.
While the European market is still dominated by a few big firms,
Deborah Fuhr, managing partner at ETFGI, a research and consultancy
firm based in London, says there are now 64 issuers of ETFs in
Europe. Recent entrants include JPMorgan Chase and Index IQ from
the U.S., andVanEck Associates has just bought Dutch ETF issuer
Think ETF Asset Management.
BlackRock Inc.'s iShares led ETF issuers in Europe in terms of
assets under management at the end of February with a 44.4% market
share, followed by DB Xtracker at 10.7%, Lyxor at 9.4%, UBS with
6.1%, Amundi at 5.8% and Vanguard at 4.6%.
Total assets invested in ETFs and exchange-traded products
listed in Europe at the end of 2017 were $802 billion, up from $573
billion a year earlier, Ms. Fuhr says. Assets listed in the U.S.,
meanwhile, stood at $3.4 trillion at the end of February.
Ms. Fuhr's firm predicts that by 2020, ETF assets will reach
$1.2 trillion in Europe, $6.4 trillion in the U.S. and $8.9
trillion globally.
Dave Nadig, chief executive of ETF.com, a New York-based
research firm, still sees fundamental differences between the U.S.
and European ETF markets. For one, he says, the ETF market in
Europe is more stable in terms of the pace of new-product
launches.
For example, he says, whereas in the U.S., "there is the
opportunity for people to put out a blockchain-related ETF and
attract hundreds of millions of dollars very quickly," the European
market is much more institutionally driven and so is "a little more
thoughtful. The issuers want to make sure they have a solid market
before a launch."
Other ETF industry experts as well say that unlike in the U.S.,
the market for ETF investments among European investors is more
determined by professionals and institutions than it is by
individuals looking to chase hot themes.
"European investors are much more likely to use an adviser or
wealth manager -- and this is where we see the most growth," says
Adam Laird, head of ETF strategy for Northern Europe at Lyxor
ETF.
Todd Rosenbluth, head of ETF research for CFRA, an independent
New York-based research firm, says that while the U.S. market for
ETFs also is still dominated by a handful of issuers, in recent
years there have been more new entrants in ETFs in the U.S. than in
Europe, including asset managers such as Goldman Sachs, JPMorgan
Chase and John Hancock offering "smart beta" products, a hybrid of
passive and active investing. Other new entrants that see
opportunities to gain a slice of the ETF pie are Exponential ETFs
and GraniteShares.
Mr. Nadig says there are still infrastructure issues that pose
challenges for European ETF trading; for example, most ETF trading
in Europe happens in so-called "dark pools," in which bid and ask
prices for the ETFs' underlying assets aren't disclosed, unlike in
the U.S. But Mr. Nadig thinks this will change.
Meanwhile, he says, the U.S. could learn from Europe in terms of
adopting more sensible ETF regulations. In the U.S., he says, rules
protecting ETF investors "are convoluted and unclear," and launches
of new products are burdened by an "endless pile" of disclosure
requirements and exemptions.
By contrast, he says, European Union rules governing ETF
document disclosures and protections for investors offer more
transparency.
Says Mr. Nadig, "I think we can learn something from that."
Ms. Akhtar is a writer in London. She can be reached at
reports@wsj.com.
(END) Dow Jones Newswires
April 08, 2018 22:15 ET (02:15 GMT)
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