Could the month of June prove somewhat of a turning point in what has so far been a sluggish year for ETF launches in Europe?
Based on the last few weeks’ activity – from major and specialist ETF issuers alike – it certainly looks that way.
The past week alone has seen BlackRock, Invesco, BNP Paribas Asset Management, UBS Asset Management and Tabula Investment Managers all hit the market with new products, ranging from thematics to broad-based equity and fixed income strategies.
It has sparked the revival of what has been less than a vintage year for ETF launches on the continent. However, a closer look at the numbers reveals new ETFs hitting the market in the first six months of 2023 still lag the last few years.
So far there have been 71 launches since the turn of the year, as at 29 June, well below the 101, 102 and 88 recorded over the past three years, according to data from ETFbook.
The low numbers have left many in the industry scratching their head as to the reasons why launches are so scarce while investors are left craving the delivery of new and innovative strategies, particularly in the fixed income space.
So, what is behind the lack of launches?
One reason could simply be that ETF issuers have looked to boost their ETF offerings via other means instead of just expanding their ETF ranges.
For example, HSBC Asset Management’s decision to launch ETF share classes of four fixed income mutual index funds earlier this year allowed it to scale up its bond ETF range at speed and low cost.
Elsewhere, Amundi has been busy consolidating its range following its acquisition of Lyxor last year, as well as shifting its strategic focus to domiciling more ETFs in Ireland due to its favourable tax treaty with the US. It has had a few notable ESG ETF launches this year, however.
Another reason could also be it is more expensive to launch.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped 2023 event in May, Matteo Andreetto, head of SPDR EMEA at State Street Global Advisors, said: “Why have there not been many ETF product launches this year? With interest rates where they are, the cost of setting up is expensive.”
He added the cost of seeding an ETF is also higher at a time when money market funds are yielding up to 5%.
As Andreetto suggested, launching ETF shares classes could be one possible way to navigate this expense, with asset managers likely keeping a close eye on developments in that space.
In the meantime, investors yearning for more innovative fixed income ETFs goes on.