Industry Updates

ETF Wrap: Milan in fashion

The Italian ETF distribution race, bank collapses and DWS’s dramatic comeback made headlines this week

Jamie Gordon

ETF Wrap

Away from big ticket fashion and runways, Milan is walking the walk in the world of low-cost investing as asset managers and investment platforms continue flocking to Italy’s financial capital to distribute their ETFs.

Last month, UK giant Legal & General Asset Management (LGIM) became the latest to make more decisive inroads into Europe’s third-largest ETF market by announcing it has partnered with Widiba Bank to distribute its thematic ETFs through Widiba’s network of financial advisers.

LGIM’s Italy push sees it enter a market known for its strong retail investor audience and some of the highest average management fees for equity ETFs, however, it is far from the first to do so in recent months.

In January, BlackRock-partnered online platform Bux became the second to launch an ETF savings plan offering in the country within a year after BlackRock-backed neo-broker Scalable Capital expanded its reach to Italy last April.

Recent developments continue a strong trend of ETF providers increasing their Italian footprint. Last July, Franklin Templeton partnered with trading platform Directa to distribute a 19-strong suite of its ETFs to retail investors.

Earlier in the year, the firm hired Silvia Anselmi as an ETF sales specialist for Italy.

Hot on its heals, Europe’s second-largest asset manager, Amundi, agreed a deal with FinecoBank in September to distribute its ETFs.

Only a month later, the bank’s asset management arm became the first Italian ETF issuer to enter the European market by debuting 11 fixed income, thematic and sector ETFs at once.

With the retail growth story in Germany well-told and London fighting to retain its share of exchange-listings, expect to hear the words ‘Italy’ and ‘ETF’ mingling in closer circles going forward.

Last September marked the 20th anniversary of ETFs in Italy. With plenty of runway for fee cuts and retail uptake, it could well be the market to watch as issuers build out the ranges accessible to potential clients.

Two banks in a week? 

This week also reminded market participants the bank-shaped cracks in the financial system are yet to close. US regulators formally shut the country’s 14th largest lender First Republic – prior to its acquisition by JP Morgan – on Monday, only for fellow California-based Pacific Western (PacWest) to crash 57% after it announced it was reviewing “strategic options”.

First Republic’s demise came after it lost 90% of its free float valuation within a matter of months as clients withdrew $100bn of deposits, more than double analysts’ $40bn forecasts.

JP Morgan is expected to take on its remaining $92bn deposits, $173bn loan book, 84 offices and $30bn in securities, a move that is expected to add between 1-3% to its 2023 to 2024 net income.

Two days later, PacWest saw its shares fall to a level more than 78% below March valuations following a 15% year-on-year decline in deposits, a $2bn net loss in Q1 and $860m in unrealised losses in its securities portfolio.

John Leiper, CIO at Titan Asset Management, warned “this is the beginning, not the end” of ongoing financial stress.

Definite winning streak 

In a stark turnaround from its biggest year of outflows in a decade, German asset manager DWS has staged a comeback in ETF asset-gathering so far in 2023, claiming two of the five top inflowing products this year in Europe.

The German asset manager added almost €4bn net new assets to its ETF arm in Q1, almost cancelling out the €4bn outflows from the division last year, as investors pulled billions of euros from its synthetically replicated strategies while a raid by German authorities in July raised question marks around its ESG credentials.

Marking its turnaround in fortunes, DWS has boasted the second-highest inflowing fixed income ETF and highest inflowing gold ETC exposure in Europe in 2023. It also launched a seven-strong suite of thematic ETFs and announced a new partnership with digital asset manager Galaxy, signalling a future entry into crypto exchange-traded products.

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

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