The first four years of Goldman Sachs Asset Management’s foray into the European ETF market have been far from successful.
GSAM entered the market to much fanfare in September 2019, however, the US giant has failed to make a significant splash after launching just five ETFs and gathering $427m assets under management (AUM).
Given its size, there was excitement that GSAM could challenge the European incumbents alongside other US entrants such as JP Morgan Asset Management, Franklin Templeton and Fidelity.
This was the noise coming out of GSAM when it made its long-awaited entrance into European ETFs with the firm’s EMEA ETFs head Peter Thompson stating investors should “stay tuned” for a big push.
Speaking to ETF Stream in October 2019, Thompson said the US giant would launch as many as 10 ETFs by the end of Q1 2020 across both equities and fixed income.
However, the number of ETF launches has so far only amounted to five which offer exposure to UK gilts, China government bonds, emerging markets, US large-caps and global equities with a Paris-aligned tilt.
The Goldman Sachs Access UK Gilts 1-10 Years UCITS ETF (GBPG), which launched in October 2021, ETF Stream revealed, has been the most successful after gathering $194m AUM, as at 7 September.
"The European ETF landscape is fiercely competitive so it is understandable that GSAM has found it difficult to make significant inroads," Monika Dutt, director of passive strategies at Morningstar, said.
"GSAM's approach to the European ETF market has been notably less aggressive compared to competitors. Their offerings have also been more tepid, lacking a significant marketing push, which might indicate that breaking into this space is not a top priority for the firm."
To help drive growth, the firm made a number of high-profile ETF sales hires including Rima Haddad as head of ETF distribution for EMEA and Hasham Niazi who covers the German market, both from State Street Global Advisors.
However, the firm has given the ETF sales team very little to distribute in the past four years, in stark contrast to its US business which has $30.8bn AUM across 36 ETFs, according to ETF.com.
Deborah Fuhr, managing partner and founder at ETFGI, said running a small ETF business inside a large organisation can present challenges around client coverage.
“How do you compensate the wider sales force to sell ETFs? This is a typical problem that new entrants face if they have an existing mutual funds business,” Fuhr explained.
As I wrote in a previous article, the barriers to entry to the European ETF market are low but the barriers to success are high.
With the market dominated by a handful of players already embedded in specific regions, being able to differentiate from both a product and distribution perspective is a challenge.
However, there is no doubt with a proper ETF strategy, GSAM’s distribution power could enable them to have an impact on the market and gather significant assets.
GSAM did not respond to request for comment.