Why has Credit Suisse re-entered the European ETF market?

Tom Eckett

a large building with many windows

Credit Suisse Asset Management made a surprise

re-entrance into the European ETF market

last week some seven years after selling its business to BlackRock, however, the big question is why the Swiss firm has chosen this moment to start its ETF adventure once again.

In 2012, Credit Suisse put its CHF16bn ETF business, which was the fourth largest in Europe at the time, up for sale as part of a wider move to bolster its capital following the Global Financial Crisis.

It is unlikely the Swiss bank’s top brass at the time forecasted the dramatic growth of the European ETF market, which crashed through the $1trn asset barrier at the end of last year.

One source from the industry said it is likely executives at the bank view the sale as a “massive mistake” and one they are now looking to rectify.

According to Bank of America Merrill Lynch (BofAML), ETF assets are set to hit $30trn by 2030 so the current $6trn level is just the tip of the iceberg.

“I am sure [Credit Suisse] see the writing on the wall,” the source added.

Within this context, it makes perfect sense for Credit Suisse to re-enter the market if one considers the huge growth potential ETFs still have.

A spokesperson from Credit Suisse AM told ETF Stream re-introducing ETFs as a “supplement” to its current €123bn index fund range was a “logical step” for the firm.

However, speaking to sources from across the ETF industry, it is unclear whether Credit Suisse’s move is a tactical ploy to ensure it does not lose assets to its rivals or a more strategic push into the ETF ecosystem.

There are some very clear reasons why the firm would want to have some strategies in an ETF wrapper versus a mutual fund, especially with US equities.

US equity ETFs domiciled in Ireland benefit from more favourable tax treatment of withholding taxes on dividends relative to an index fund based in Luxembourg.

Therefore, the move to convert the three US equity index funds into a more efficient investment vehicle last week certainly brings structural benefits to Credit Suisse’s investors.

Another industry source said: “It seems to me a case of stopping existing clients migrating to other providers in search of a more efficient way of gaining basic building block exposure to US equities.”

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While Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, added the firm was simply responding to client demand.

“It feels more like a one-off than a full-fledged ‘we are back’ in the market,” he concluded.

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