It has been another busy year for the European ETF market which continues to expand at an impressive rate, topping $1.5trn at the end of November.
Not without its challenges, the market recorded another bumper year of inflows over 2021 – over $1trn globally - as investors flooded into the wrapper in a bid to capitalise on the Covid-19 recovery.
While rising inflation dominated news cycles throughout the year, reader interest peaked around the issues of clean energy ETFs in the first half of the year while industry-shaping acquisitions caught the attention in H2.
From clean energy to Cathie Wood’s ARK Investment Management, here are ETF Stream’s most-read stories in 2021.
1. Clean energy ETFs are a painful reminder of the costs of investing too early
The most read story of 2021 is analysis of clean energy ETFs’ past performance. Despite being on a tear in the first few months of the year, it has been a volatile 12 months for clean energy ETFs overall and in the longer term the outlook is even less rosy.
Looking at the two largest products in the asset class, the Invesco Solar ETF (TAN) and the iShares Global Clean Energy ETF (ICLN), both are down since inception.
ICLN is 13.6% down since it was launched in 2008, while TAN is almost 60% down since it was launched in the same year. The case highlights how it is perhaps even worse to be too early than too late to invest in a future theme.
2. CoinShares unveils ripple ETP
One of many crypto launches throughout the year, CoinShares ripple (XRP) exchange-traded product launch in April caught the attention of readers after the digital currency ran into controversy at the turnoff of the year.
It came after the Securities and Exchange Commission filed a lawsuit against XRP’s creator for illegally marketing the crypto asset to retail investors.
The CoinShares Physical XRP (XRPL) is listed on the SIX Swiss Exchange with a total expense ratio (TER) of 1.50%, with cryptocurrency close to an all-time high of $1.7 at the time of launch.
3. BlackRock clean energy ETF index to triple in size following SPDJI consultation
Clean energy was clearly at the forefront of readers minds in the first half of the year and in March issues around the meteoric rise of clean energy ETFs come to the fore following huge inflows into a concentrated basket of small and mid-cap equites.
As a result, S&P Dow Jones Indices (SPDJI) said it would be increasing the number of holdings of its clean energy ETFs from 30 to 100 following a consultation with the market, having a major impact on BlackRock’s ICLN.
SPDJI moved to fix concentration issues in the index but risked reducing the intensity and exposure to pure play clean energy stocks as a result.
4. Royal Mint ends physical delivery agreement on WisdomTree’s gold ETC
The Royal Mint terminated its eight-year physical delivery agreement on WisdomTree’s Gold Bullion Securities (GBS) in February.
In means investors were no longer able to exchange their shares for gold bullion coins or bars issued by The Royal Mint. It came after The Royal Mint launched its own gold exchange-traded commodity (ETC) – Royal Mint Physical Gold Securities ETC (RMAU) – a year earlier.
Redemption can now only be performed via a London Bullion Market Association (LBMA) channel and into an unallocated account, which incurs some credit risk for the LBMA member.
5. Record demand for clean energy ETFs causing liquidity risks
As a prelude to SPDJI’s index adjustment, our fifth most read story of the year highlights the liquidity and overconcentration risks faced by BlackRock’s clean energy ETFs.
Buoyed by US President Joe Biden’s US-election pledge to commit $2trn to climate-related infrastructure projects, clean energy ETFs took off in the 12 months to March 2021. However, SocGen analysts warned the index design has the potential to cause liquidity issues in the underlying constituents.
The move prompted SPDJI to launch a market consultation that eventually led to the index expansion.
6. Invesco and State Street merger would create ‘big four’ European ETF issuers
Rumours of a potential deal between two asset management giants first emerged in December 2020 when Bloomberg reported State Street was considering selling its $3.1trn asset management business.
Subsequent analysis of what the merger would look like showed that the combined ETF business would be vying for a spot as one of the top three ETF issuers in Europe with a combined AUM of €98bn.
In October, a report by Citi suggested the merger would not be in the best interest of Invesco, adding the most likely course of action would be for the firm to stay its current course. State Street said later that month it had no intention to sell its asset management business as inflows into its ETF products boosted AUM by 23% in the year to September 30.
7. LGIM launches Europe’s first hydrogen economy ETF
Another product launch that caught readers' attention was the L&G Hydrogen Economy UCITS ETF (HTWO), the first of its kind in Europe.
Tracking the Solactive Hydrogen Economy index, HTWO offers investors exposure to the transition to a low-carbon, hydrogen economy.
This includes companies that are enabling the production of cheaper, cleaner forms of hydrogen and those that are expected to play an important role in this economy.
8. State Street becomes world's largest custodian with acquisition of Brown Brothers Harriman Investors Services
State Street became the number one provider of asset servicing in September, after acquiring the investor services arm of Brown Brothers Harriman (BBH) for $3.5bn.
At the time of the deal, the combined business had $36.3trn assets under custody on its books, overtaking BNY Mellon as the world’s largest custodian, as State Street beat off rivals including BNP Paribas and Northern Trust to seal the deal.
9. Big Short’s Michael Burry closes bet against Cathie Wood’s ARKK ETF
With neither protagonist in our penultimate no stranger to headlines it is no wonder Michael Burry’s hedge fund’s closure of its bet against Cathie Wood found it in our top ten.
Scion Asset Management disposed of its 235,000 shares – valued at $31m – of the ARK Innovation ETF (ARKK) in Q3 having taken a bearish stance on the product during the first half.
However, Burry could have done with waiting just a little longer. Since the story was published in late November ARKK has fallen a further 16.4% following a steep sell-off in unprofitable tech companies.
10. European investors can access Cathie Wood’s ARK ETFs for first time
Rounding off our most read stories of 2021 is the Leverage Shares launch offering various degrees of leveraged and unleveraged exposure to three ARK Investment ETFs.
European investors for the first time were able to take one-to-one, triple leveraged and triple short positions on ARKK, ARK Next Generation Internet ETF (ARKW) and ARK Genomic Revolution ETF (ARKG) all run by Wood.
It was part of 42 ETP launches by Leverage Shares which also offered physically-backed exposures on blue chip stocks in sectors such as healthcare, airlines and financials, including Berkshire Hathaway.