Industry commentators have said Amundi’s decision to acquire French rival Lyxor could be a sign of things to come for the European ETF industry, however, questions remain about how the product range will look and whether the combined firm can challenge BlackRock at the top of the tree.
With rumours circulating for years that Société Générale was looking to offload its asset management arm, the investment bank looks set to close a deal with its French counterpart, Amundi, worth around €825m.
Jose Garcia-Zarate, associate director of passive fund research, EMEA, at Morningstar, said Amundi has always been a frontrunner in the potential takeover and its long-standing strategic distribution alliance with SocGen should offer some help.
Upon completion, Lyxor’s €77bn ETF assets under management (AUM) will be added to Amundi’s assets to create an ETF business with a combined AUM of €142bn. This will see Amundi take a European ETF market share of 13.6%, making it the continent’s second-largest issuer ahead of DWS with 11.2% but comfortably shy of BlackRock’s 43.6% stake.
Commenting on the acquisition, James McManus, CIO at Nutmeg, said: “[The] combination of two large providers into what would be the second-largest ETF provider in Europe is no bad thing for competition – particularly two well respected European asset managers.”
Echoing his thoughts, Andrew Limberis, investment manager at Omba Advisory & Investments, added: “With the level of competition and narrow profit margins in the industry, scale is important, and so I ultimately see this as a net positive for ETF investors.”
As noted by Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, the acquisition will see Amundi take control of around 17% of ESG ETF assets in Europe, alongside nearly half of all synthetically replicated ETF AUM.
Through the Lyxor acquisition, Garcia-Zarate said Amundi not only enters a battle for the number two spot in Europe with DWS but enters a rivalry with DWS in its home country, Germany.
“By buying Lyxor, they are also buying market share in Germany, as Lyxor took over the ETF business of Commerzbank in 2018,” Garcia-Zarate added. “It seems to me that what we will see is intense competition between DWS and Amundi/Lyxor to regain/defend this second place in coming years.”
As two large ETF issuers with a wide coverage of the ETF market, Limberis said there will inevitably be some overlap in Amundi and Lyxor’s product line-ups.
On this, Psarofagis said: “There are going to be quite a few product closures and mergers (as we saw with Lyxor-ComStage deal) but this should go pretty smoothly.
“Almost all of their assets are either in Luxembourg or France so it could be easier to tidy the line-up.”
How significant is Amundi’s gambit?
Commenting on what the acquisition will mean, Daniel Izzo, CEO of GHCO, said the sale of Lyxor will help to shape the European ETF landscape over the next decade.
“Europe’s largest issuers have been competing for supremacy for a number of years now and this is a strong move for Amundi in the context of the surging popularity of passive investment products,” Izzo added.
Garcia-Zarate said the deal will act as a further step in the ‘dual business structure’ of the European ETF market which he sees as divided into large generalist providers searching for AUM amid downward pressures on the fees of mainstream products, and specialist providers commanding high fees with limited AUM.
“There simply is not room for too many large generalists and so we should not be surprised to see consolidation in that space,” Garcia-Zarate concluded.
Peter Sleep, senior portfolio manager at 7IM, noted the ecosystem has seen consolidation before and said the merger means very little for the European ETF industry.
“Names have changed but the industry remains dominated by BlackRock with the other firms doing their best to compete and carve a niche for themselves,” Sleep continued. “At present, according to Bloomberg, there are 60 ETF issuers in Europe, and I am confident there will be more by the year-end.”
Offering an optimistic conclusion, Limberis finished by saying large acquisitions of this type do not occur very often, and he hopes Amundi uses its title as Europe’s largest issuer – from Europe – to advance innovation in the industry.