Consolidation has been a hallmark of the ETF sector in recent years as the market continues its growth trajectory, with global assets exceeding $5.7trn (€4.9trn) and 46 consecutive months of net inflows in Europe as of July this year. European assets are soon set to exceed the $1trn mark, according to ETFGI.
Can investors rely on established and emerging big players to keep costs down and to continue innovation? On the positive side of the equation, some 66 providers are active in Europe alone at present.
Yet the top three European providers – iShares, Xtrackers and Lyxor – account for over 60% of European ETF and ETP assets. While iShares alone has market share of almost 44%, there is a long tail of small providers outside the top three, all with a market share of 7% or less.
And 70% of the assets are concentrated in less than 10% of European listed ETFs and ETPs, with 8.7% (202 of 2,320 listed funds) holding more than $1bn in assets, according to ETFGI.
To stay competitive and relevant, ETF and ETP providers must show they can continue to offer value for money as well as innovate. This may not be so easy as market cost pressures increase and margins diminish in asset management overall.
As many institutional investors embrace equity strategies with pure index, systematic and factor exposure components, with active management strategies under ever more scrutiny, ETF providers have something to offer. And as QE comes to an end and interest rates shift, active fixed income strategies could prove to be an interesting area of competition and innovation.
Liam Kennedy, Editorial Director, Investment & Pensions Europe
Editor’s note: this guide contains a number of sponsored articles, as indicated opposite the frontispiece. The publication of these articles should not be taken as an endorsement of their contents.