Industry Updates

Mutuals will be marginalised by passives rise says McNeil

Scott Longley

Mutual funds will be marginalised by the rise of ETFs within the next decade says the chief executive of new white-label ETF provider HANetf.

Hector McNeil, who launched HANetf earlier this year alongside partner Nik Bienkowski, says that with predictions for the total market share for passive funds in Europe set to treble in the next decade, it will mean that they could usurp the place of mutual funds in the investment pecking order.

Says McNeil: "While total assets in passive funds may be relatively low at the moment, we think that, with fees falling and a regulatory backdrop that is conducive to growth, ETFs' market share could be north of 35% within five-to-10 years."

He adds that if comparisons with the US are made, it can be seen that European ETF AUM is following a similar trajectory. "If this continues, mutual funds could well find themselves consigned to the legacy bucket within 15 years."

Part of the reason behind the rising popularity of ETFs, he goes on to suggest, comes through their relationship to wider trends in the adoption of technology among investors.

"ETFs, more than traditional mutual funds, are attractive to the next generation of savers and investors who will do everything via their mobile phone and are used to transacting immediately for every product."

"Many new solutions such as robo-advice are also taking a passives-only approach when building propositions and we believe active managers will either move to launch new ETFs, or they will merge mutual funds into ETFs, or at least have more characteristics of them."

HANetf launched in August and in November announced it had completed a seed funding round including investors Peter Thompson, co-founder of Source ETF and Point72 Ventures, an early-stage venture capital fund helmed by Steve Cohen. The company will be providing a turnkey solution for both ETF issuers and traditional asset managers looking to enter the European ETF market.


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