A white paper highlighting the differences in the European and North American ETF markets has shed useful light on the EU ETF market for fund managers and distributors. The Transatlantic Divide in ETF Distribution Practices looks at how ETF buying patterns look very different when funds are listed on European exchanges.
Among some of the main differentiating factors the white paper looks at are:
- Strong institutional presence in the European market, with approx. 80% of ETFs in the hands of institutional investors
- No requirement for individual investors to manage their own social security investments due to strong national pensions culture
- Control of fund distribution by banks in many European countries
- Preference in some markets for property or cash, despite low interest rates
- Lack of a single unified market with just one regulator
The white paper highlights many of the issues ETF managers need to consider when launching in the European market. The market looks very different from the retail and brokerage-driven one in the US, and the emphasis for US ETF managers looking at a European distribution strategy should be making sure they are working with the right partners.
“We work with ETFs in both Europe and the US, so have evolved a good grasp of some of the operational and regulatory demands that are placed on ETFs in these differing markets,” said Dave Shastri, Head of Strategy at Truss Edge. “Just because an operation has succeeded in one market does not mean it will immediately gain traction in the other. It is important that fund managers work with partners who have the experience and infrastructure to assist with a successful launch. It is very tough going it alone.”
Truss Edge provides technological and operational support for ETF fund managers of all sizes. The platform delivers the high level of integrated reporting and automation that is required for daily dealing funds, coupled with a proven middle and back-office template that is used for some of the largest ETFs in the market.
“Getting the right team in place to staff your local sales and distribution activities is essential for ETF launches,” noted Andrea Murray, Head of ETF Business Development at Blackwater Search & Advisory. “The multi-lingual nature of the European market means fund managers need to look at hiring teams which are comfortable with operating in markets where English is not the first language, and where cultural mores around investment are different from the US. When launching product in a new market, a copy and paste approach is a non-starter which is why firms like Truss Edge and Blackwater Search & Advisory can successfully help guide asset managers through the intricacies of each market.”
The white paper was authored by Blackwater Search & Advisory, a global consulting and recruitment firm helping asset managers build their ETF and Digital Assets business, grow assets under management and source the best talent the industry has to offer. The firm often produces high calibre content such as award-winning insights and white papers. A copy is available for download here.