The direction of travel is clear for the European ETF industry and another big name from the active mutual fund space, Martin Gilbert, has become the latest to tip his cap to the wrapper.
The former Aberdeen Asset Management CEO told ETF Stream at ETF Ecosystem Unwrapped last week that one of his biggest regrets during his tenure at the firm was not launching an ETF business to sit alongside the mutual fund range.
“One of the mistakes I made was not realising how big they would get,” he reflected. “Asset managers should have an ETF business; it is the future.”
Gilbert, who founded Aberdeen Asset Management in 1983, has had a front-row seat to the rapid development of the ecosystem since the first ETF was launched in Europe 21 years ago in 2000.
Since that time, ETFs have collected some €1.2trn assets under management (AUM) this side of the pond, growing at an annual rate of over 20% a year since the Global Financial Crisis (GFC) in 2008, according to data from PwC.
Meanwhile, doubts surrounding the mutual fund structure have increased over the past few years as big gating events such as Neil Woodford’s flagship fund, H20 and the UK property strategies – to name but a few – highlight potential shortcomings during periods of rapidly vanishing liquidity.
Following the Woodford scandal in 2019, former Bank of England governor Mark Carney warned mutual funds were “built on a lie” due to the liquidity mismatch between the offer of daily trading and the underlying holdings.
While ETFs trade intraday, the fact they have a secondary market that matches buyers and sellers provides investors with an extra layer of liquidity during periods of market stress.
In recognition of the dramatic growth, ASI did enter the ETF industry in 2018 under Gilbert’s management following the acquisition of ETF Securities’ US business.
The asset manager has been planning to launch in Europe as well under current CEO Stephen Bird who signalled a move at the back end of last year. This was reinforced when the firm poached Chanchal Samadder from Lyxor to head-up its ETF sales strategy in March.
At the time, a spokesperson from ASI told ETF Stream: “Work is underway to build upon this success, by delivering our research and analytical strengths via ETFs.”
The question is whether players entering the space now can gather significant scale to challenge the bigger players; a tall order in a market that is highly fragmented and extremely competitive already.