Standard Life Aberdeen (SLA) looks set to make its long-awaited entrance onto the European ETF market but questions remain as to how they will take on the well-established giants of the space.
In an interview withBloomberg, newly appointed SLA CEO Stephen Bird (pictured) signalled plans to build out the firm’s passive range this side of the pond to ensure the asset manager meets client demand.
The transition to ETFs shows no signs of slowing down with the wrapper growing at an annual rate of 20.5% between 2008 and June 2020, according to PwC data.
“We can either buy proprietary ETF technology, buy an ETF business or build it,” Bird said. “You have to be able to provide a full suite of solutions to your clients.”
SLA is already a player in the ETF ecosystem in the US following its acquisition of ETF Securities’ US business in 2018.
However, the firm is yet to make the jump in Europe despite its significant index fund range which has over $9.5bn assets under management (AUM).
How SLA makes its entrance remains to be seen. The ETF Securities acquisition shows the firm is not concerned about buying its way into a space.
As Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said: “This was expected eventually. They are one of the largest UK asset managers and rivals L&G and HSBC are already here.
“The firm has its US ETF business which shows they are open to the idea of ETFs and they may have more success in the UK as they already have distribution set up.”
Executives at the asset manager will certainly be looking across the English Channel at French asset manager Lyxor which has been put up for sale by parent company Société Générale.
The news was first reported by Reuters in September which was told by sources SocGen had hired Citigroup to oversee the sale. Europe's biggest players are now eyeing up the acquisition including Amundi, Deutsche Bank, BNP Paribas and JP Morgan.
With over €70bn AUM in its ETF range, the third-largest in Europe, a Lyxor acquisition would be a perfect way to for SLA to announce itself as a serious player.
As Kenneth Lamont, senior analyst, manager research, passive strategies at Morningstar, said: “An acquisition of Lyxor could be a ticket to instant scale and may be a logical move for a firm looking for a new post-merger identity.”
However, the landscape remains tough with low barriers to entry but high barriers to success.
BMO found this out the hard way after the Canadian bank pulled the plug on its European ETF operation last November after attracting just over €600m AUM across 13 strategies.
“While the market is growing, fee competition remains fierce and margins are razor thin,” Lamont continued. “Despite being the biggest asset manager in the UK, larger global players have entered the European ETF market and have failed to gain assets.”