Industry Updates

ETF Wrap: Existential challenge for ETF issuers in Europe

Questions surrounding the viability of the UCITS ETF roster, Lord Jim O'Neill revisiting BRICs and cannabis ETFs being extinguished made headlines this week

Jamie Gordon

This week, research from ETF Stream revealed little over half of ETFs in Europe are able to cover their costs based on revenue derived from fees.

Based on a middling average cost estimate of $300,000 to $350,000 per year, just 51.5% – or 955 out of 1854 – of UCITS ETFs are in profit-making territory.

Meanwhile, around 46% – or 849 ETFs – fall below this range, suggesting they cannot cover their costs on a product-by-product basis.

It is worth noting costs to run a single UCITS ETF can range from $80,000 to $500,000 per year, with some stating average costs easily exceed the $350,000 mark.

The accidental BRIC alliance

At ETF Stream’s recent ETF Buyer London conference, Lord Jim O’Neill said that he never intended his BRIC acronym to start a political club in emerging markets. 

The former Goldman Sachs economist added the recent decision to expand the group’s membership, may serve little purpose other than to have a club excluding the US. 

Turning to China, O’Neill said he was not surprised by the country’s recent slowdown, given the demographic trends that began taking shape decades ago. 

Cannabis ETFs snuffed out 

Finally, cannabis ETFs will cease to exist in Europe, after ARK announced it will shut the Rize medical cannabis ETF as part of a raft of closures following ARK’s acquisition of Rize ETF in September.

It follows HANetf choosing to merge its underscaled cannabis ETF, into its healthcare megatrend ETF in September.

After booming in 2021, thematic ETFs more broadly have faced losses and closures, with interest rate hikes proving a particular challenge to these ETFs reliant on growth-heavy names.

ETF Wrap is a weekly digest of the top stories on ETF Stream

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