Index provider MerQube has made a statement of intent by hiring former Deutsche Bank ETF trading head Varun Jain as head of Europe and replacing Bloomberg as the administrator of UBS' CMCI index family, ETF Stream can reveal.
Jain joined MerQube in June after spending almost three years as CIO at alternative investment specialists Cygnus Capital. Previously, he worked at Deutsche Bank for 10 years, latterly as head of equity ETF trading for Europe.
Roby Muntoni (pictured), chief commercial officer of MerQube, told ETF Stream Jain was hired for his technical knowledge and experience in structured products and investment banks.
“We have four people in the London office now including two financial engineers and one focusing on regulation and compliance,” Muntoni added.
On 1 July, MerQube made its first step into the ETF market in Europe by taking on the day-to-day operation of the benchmarks underlying UBS Asset Management's Constant Maturity Commodity Index (CMCI) ETFs.
Vinit Srivastava, co-founder and CEO of MerQube, said: “Bloomberg was the administrator and calculation agent for these indices previously but the speed of development needed on a complex index suite just is not there with large, existing providers.
“We said running the families would be easier than making small changes to the existing range. That was a big vote of confidence because it is close to 1200 indices, 250 in real-time and a good amount of assets in ETPs tracking them.”
Now looking to bring its own indices to Europe, Muntoni argued there is a gap in the market for more options-based, multi-asset and quant-based wrapped products on the increasingly complex side of passive “that almost bleeds into active”.
Much as thematic ETFs were a fringe movement four years ago, Srivastava believes defined outcome could make its way from the structured product space into ETPs in Europe – as it has done over the last three years in the US.
Defined outcome strategies are difficult to build and deliver because of the options embedded within them, however, Srivastava said he anticipates demand from private investors searching for buffering and income protection.
“A big difference has been the adviser market in the US versus the IFA market in Europe, which is a lot smaller but has potential to take off,” Srivastava continued. “Fee-based advisers enjoy vehicles like ETFs which make more sense as the components of their model portfolios.”
Another options-based solution he did not rule out was bringing managed futures back to ETFs in Europe.
“We run managed futures strategies for clients in the US and obviously would love to run similar products to Europe but the market is a little more challenging.”
While many tend to view Europe and Asia as “monoliths”, Srivastava warned launching ETFs this side of the pond requires differentiating between countries’ regulations, ETF ecosystems and broader investment cultures.
Muntoni added: “Europe is a fragmented market where participants have to interact with different exchanges. But to grow in Europe, you have to be in Europe and understand the dynamics and investment needs of each country.”
MerQube had its IOSCO compliance verified in September and is currently registering with the FCA.