HANetf, in partnership with London Stock Exchange Group, hosted a breakfast event on 22 April titled “How to enter the European UCITS ETF market”. After introductory remarks from Katya Gorbatiouk, head of investment funds at LSE, David McNay kicked off the event with a presentation titled “Themes and Trends: Top of Mind for Capital Allocators”. This macro discussion was unsurprisingly focused on the economic fallout from war in Iran, particularly in the oil market.
Detlef Glow, head of Lipper ETF Research followed with a review of fund flows in the ETF sector. A key message was that, while clearly a growth area, active ETFs are still a very small part of the market – his pie chart showing a mere 3% sliver of active funds dwarfed by 97% passive, graphically illustrated this point. The market continues to be dominated by a small number of very large providers, with iShares well out in front. On current growth trends, Detlef said the European ETF market had the potential to reach $16trn, which would be larger than the current total in the US. He accepted that growth to such a precipitous level was unlikely, but even a slowdown would see the market grow to a much higher level than its current size of $3trn.
Akhil Suresh, senior manager, investment funds at LSE led a fireside chat on ETF distribution in Europe. Hector McNeil, co-CEO and Founder of HANetf, had come armed with a number of interesting statistics. The breadth of interest from providers was illustrated with his report that HAN has received 3,500 enquiries about establishing an ETF. However, clearly it is distribution that is the hardest part of the process, after setting up the fund through a white label provider. Hector said that £50m was the breakeven point for active ETFs; any survey of the sector shows that many new launches struggle to get to this size. The average fee for active ETFs is 0.75%, and Hector reiterated that ETFs were no longer necessarily a low fee asset, particularly given the rise of active funds. What matters to investors is after-fee performance, so providers can charge above this average if they can prove their value-add through unique intellectual property.
