Fabio Melisso, CEO of Fineco Asset Management, is not shy about the firm’s future ambitions.
Speaking to ETF Stream for the first time since entering the European ETF market in October, Melisso (pictured) is looking beyond the Italian market towards the European continent and sees ETFs as the perfect way to achieve this.
Fineco AM announced itself as a European ETF issuer with aplomb, coming to market with 11 ETFs comprising six equity products – including three thematic ETFs and three sector ETFs – and five fixed income products, all listed on the Borsa Italiana.
The asset manager is now the only Italian ETF issuer in Europe after UniCredit liquidated its two remaining ETFs in November, just 18 months after they were launched.
“Our aim is to be a leader and have the first mover advantage to create the right path going forward,” Melisso said. “To be the only ETF issuer headquartered in Italy means we can gain market share and lead for a long time to come.”
In order to achieve this, Fineco AM will look to leverage its well-established financial planned network via its banking arm, FinecoBank, which currently serves 1.45 million customers across Italy and the UK.
“At the moment, the primary focus is to serve the FinecoBank customers. This is the right focus for us initially without moving too fast,” he said. “However, should Fineco Bank start setting up its operations abroad, our ETF offering is the perfect tool to help with that expansion.”
FinecoBank entered the UK market in 2018 combining brokerage, banking and investment services and has been growing at an impressive rate. The bank’s UK client base has grown 14.3% to roughly 22,000 over the first three quarters of 2022 – an expansion it explains via “word of mouth” – leading to a 31% increase in revenues in the UK compared to the first nine months of 2021.
The firm is hoping to achieve a similar feat in Germany, Europe’s fastest-growing ETF market, in the first half of 2023 with further countries likely to be targeted “in the next few years”.
‘Offer ETFs, or risk losing customers’
As well as aiding the wider group’s expansion across the continent, Melisso sees its ETF offering as fundamental to capturing the next generation of investors and safeguarding the future of the business.
“If we want to grow the business in Italy and beyond ETFs are the necessary next step because it is clear the younger generation is looking for these kinds of products,” he said. “Advisers need to have efficient products to optimise their portfolio without increasing costs for customers, otherwise they risk compromising the relationship.
“The entire market is moving on,” he continued. “If you are not making the move into ETFs, you are becoming an old player that cannot take advantage of customer needs.
“We need to offer alternatives, otherwise we are losing customers.”
Furthermore, Melisso said he believes the current market volatility means it is a good time to enter the ETF industry.
“Costs are one of the most important elements at the moment, particularly in this period of volatility which is dramatically impacting performance,” he said. “If the alternative is with an active management solution that is not beating its relative benchmark, then it is better to have a much cheaper product. The increasing usage of ETFs is down active management strategies that are not performing.”
The statement of intent for ETFs is even more striking given Fineco AM’s wider stature in the market. The asset manager currently houses €25bn assets under management – €15bn of retail money and €9.9bn of institutional – offering over 100 funds across five different business lines, including active management.
So far, the products have proved popular. The 11 ETFs had amassed €243m assets under management (AUM), as at the end of October, well ahead of other new launches in the same month, according to Bloomberg Intelligence.
Next generation investors
Part of the reason behind launching the new ETF range was to target the next generation of investors. According to FinecoBank, the average age of its active investors is 50-years-olds and Melisso is keen to see that lowered.
“The younger generation is used to considering much more than traditional mutual fund offerings and we need to gain a market share in that area,” he said.
Fineco AM is planning to achieve this is through its thematic and ESG offering. Eight out of its 11 ETFs have a sustainable tilt, while two ETFs – the Fineco AM MSCI ACWI IMI Cyber Security UCITS ETF and the Fineco AM MSCI World Semiconductors and Semiconductor Equipment UCITS ETF – are targeting megatrends it hopes will last long into the future.
“We are not doing thematic products to play the latest fashion item for a short period,” Melisso said. “We have selected themes we believe are structural megatrends that will be relevant for a long time.”
Despite its fast start to life, Melisso believes its biggest challenge going forward is growing the brand to a point where it can compete with industry stalwarts such as BlackRock and Vanguard. The high barriers to success in the European ETF market are well documented with the likes of BMO and UniCredit exiting the space in recent years.
“The biggest challenge is the brand. Investors are used to considering ETFs through Vanguard, BlackRock and Amundi which are obviously very well known,” he said. “We are using FinecoBank to compete with those market leaders.
“The challenge will be explaining the rationale behind the ETF offering to give investors something new over existing products.”
One way it plans to do this is by extending its ETF range over the coming months.
As Melisso said: “We are in a good position with our 11 products but the aim is to continue to extend the catalogue to provide the right number of products for customers.”
This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To access the full issue, click here