For smaller providers that cannot compete on scale, they are offering either new, proprietary types of ‘smart beta’ or leveraged/short strategies. For example, Hector McNeil, chief executive officer at Boost ETP, believes the market in the UK will start to look increasingly like the US market: “There is currently $60bn (£36bn) in short and leveraged strategies globally, of which $10bn is in Europe.”
Mr McNeill believes that his natural market is those investors currently using contracts for difference (CFDs) and spread betting. He adds: “This type of product can be used to create more flexibility around a portfolio.”
Other groups to have come into the market include First Trust, a US ETF provider, which listed three LSE-listed ETFs in 2013, run using the group’s proprietary ‘AlphaDEX’ methodology. The group slices up a traditional index based on a number of fundamental characteristics, including different value and growth attributes, designed to create ‘alpha’ over the benchmark.
The ETF market may appear to be all about cost, but it has more sophistication than that. There are other ways that the larger fund houses differentiate themselves, and for newer, smaller groups a proprietary offering is essential.
Cherry Reynard is a freelance journalist
ETF PROVIDERS
Here is a snapshot of some of the biggest and smallest ETF providers currently operating in the UK in alphabetical order.
Amundi ETF
The Amundi Group offers a wide range of ETF products on the main European stock exchanges of NYSE Euronext Paris, Deutsche Börse, Borsa Italiana, SIX Swiss Exchange and the London Stock Exchange. It currently has 53 ETFs listed in the UK, covering global, Europe, sector and thematic equities. The first UK-listed ETFs were launched in May 2011 and it is estimated to be in the top five of European ETF providers, with total assets under management of approximately ¤12.2bn (£10.1bn).
Deutsche Asset & Wealth Management
With its db-X trackers ETFs, this is the second largest ETF provider in Europe, registering more than £30bn in ETF assets under management as at April 3, 2014. The first db-X trackers ETF launched in the UK in 2007, and there are currently approximately 190 offerings available to UK retail investors covering equities, fixed income, cash, commodities, currencies, credit, and multi-asset. There are roughly 122 equity ETFs and 47 fixed income offerings, including the recently launched global aggregate investment-grade bond market ETF.
ETF Securities
The company currently has 268 exchange-traded products listed in the UK, offering what it suggests is a comprehensive range of exchange-traded commodities. Aside from commodities, it also has vehicles covering equities, currencies and volatility. It launched its first UK-listed ETF in 2004, with the Gold Bullion Securities vehicle, and it currently has approximately $15.5bn (£9.3bn) assets under management in ETFs in Europe.
