S&P Dow Jones Indices CEO: A Number Of ETF Players Will Not Survive
Alex Matturri of S&P Dow Jones Indices
S&P Dow Jones Indices chief executive Alex Matturri has issued a stark warning for smaller ETF providers trying to break into Europe, suggesting they need to consider M&A in order to survive.
Matturri predicted there will be continued consolidation within the ETF industry as there are currently too many similar products, while the major providers have already taken market share.
Last year saw a number of acquisitions across the ETF space, with Invesco Powershares snapping up Source and Guggenheim Partners' smart-beta range, while WisdomTree acquired ETF Securities for $611m.
Head of ETPs at S&P Dow Jones Indices, John Davies, said: "The big will get bigger and the small, if they are lucky, will get swallowed up or, if they are unlucky, will go out of business."
Matturri added there is a huge advantage in being the first to bring ETFs to market: "The winners in Europe in ten years are already here.
"It may not be the same one, two or three but they are here already and launched ten years ago, as they are the ones that capture liquidity and flows. Success breeds success."
European ETF market
Matturri also noted there is still a belief in Europe that active managers can outperform passives, whereas in the US that belief is long gone.
He said the huge flows into passive products in the US are a function of technology and transparency, as all companies have to disclose everything to everyone at the same time.
However, in Europe, the CEO said investors continue to believe active managers will outperform and this culture is driving flows into these products too.
Key industry players join forces as IA sets up ETF committee
Regulation impact
Davies added MiFID II rules, which came into effect on 3 January, will eventually have a major impact on transparency, although this will not be felt straight away.
He said the rules requiring full transparency of fees and reporting on trading, which will enable investors to see the full liquidity of ETFs, are two areas where this impact would be felt.
"That is one of the challenges of Europe as a whole," Davies said. "It is a fragmented market where ETFs are listed in London, Frankfurt and Milan. It is not like the US, which is a homogenous market, so hopefully MiFID II will have an impact from that perspective as well.
"European regulators are trying to force what happened in the US naturally," Matturri added. "In the US, you had this growth of the use of low-cost products and ETFs that developed without regulatory impact.
"It was more because investors were more aware and cost-conscious. In Europe, they are force feeding it as there are a lot of built-in barriers."
Mitigating Risks In The Bond Market: Strategies For Uncertain Times
In today's volatile bond market, characterized by liquidity concerns and rising interest rates, effective risk managemen... Read more
UK High Street Banks Rake In £9.2 Billion In Interest On BoE Reserves: A Closer Look
In the intricate world of finance, where numbers often tell compelling stories, one recent figure stands out: £9.2 bill... Read more
Powell's Pledge: Federal Reserve Chair Signals Prolonged Period Of Higher Rates
Federal Reserve Chair Jerome Powell's recent statements have stirred significant interest in financial markets, particul... Read more
European Funds Body Throws Support Behind French Capital Markets Union: Implications For Brexit-Era Finance
In a significant development for European finance, a European funds body recently threw its support behind the French ca... Read more
Federal Reserve's Rate Decision: Navigating Economic Uncertainty
The recent decision by the Federal Reserve to adjust interest rates has sparked significant interest and speculation amo... Read more
Building Bridges: Strengthening Investor Confidence Through Enhanced Risk Data In Emerging Markets
In the dynamic landscape of emerging markets, investor confidence plays a pivotal role in driving economic growth and pr... Read more