Industry Updates

ETF Wrap: More US giants enter Europe

US fund giants entering Europe, ESMA launching review to standardise definitions and interpretations of UCITS assets and State Street shortening settlement cycles of dozens of UCITS ETFs ahead of the move to T+1 all made headlines this week

Lauren Gibbons

This week, two US asset managers targeted European expansion with Pacer ETFs launching three strategies and Janus Henderson acquiring fixed income specialist Tabula Investment Management.

Pacer ETFs launched three ETFs in Europe from its flagship Cash Cow range, which raked in a total $35bn assets under management (AUM) across 2023 in the US.

Pacer’s most successful ETF from the range grew from $12.5bn to $20bn AUM in 2023.

The three Cash Cow ETFs invest in the top 100 companies from the Russell 1000 with the highest free cash flow yield, signalling they generate significant excess cash for growth investments.

Janus Henderson also marked its entry into Europe by acquiring Tabula Investment Management.

The firm is set to introduce a suite of actively managed ETFs, while maintaining Tabula’s existing ten-strong fixed income range.

Fund selectors have noted that the tie up could mark an accelerated roll-out of actively managed bond ETFs in Europe, aided by Janus Henderson’s experience with active fixed income products in the US.

ESMA reviews UCITS asset rules

The European Securities and Markets Authority (ESMA) launched a long-awaited review of the UCITS Eligible Assets Directive (EAD).

Last updated in 2007, the review aims to clarify definitions and standardise the interpretations of the type of assets UCITS funds invest in.

ESMA has opened a call for evidence to understand the risks and benefits of including more "exotic" asset classes, including crypto, commodities, delta-one instruments and exchange-traded notes (ETN).

The increasing variety of instruments traded on financial markets since 2007 has “[given] rise to divergent interpretations and market practices,” ESMA said.

SSGA shortens settlement cycles

State Street Global Advisors has shortened the settlement time of 42 UCITS ETFs ahead of the move to T+1 cycle in the US later this month.

Impacted ETFs will see their creation and redemption settlement cycles reduced from two days to one.

These include products like the SPDR S&P 500 UCITS ETF (SPY5) and the SPDR S&P U.S. Dividend Aristocrats UCITS ETF (USDV), as well as global exposures such as the SPDR MSCI World UCITS ETF (SWRD).

While Europe remains on a T+2 cycle, concerns have been increasingly heightening over ETFs breaching UCITS funding rules.

Last month, the European Securities and Markets Authority (ESMA) dismissed industry appeals to modify UCITS rules despite concerns that ETFs might breach them due to T+1 misalignment.

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