ETF Stream: Lyxor has been on a hiring spree in the past year - why does the company think that now is the right time to expand?
David Lake: This has been a killer year for ETFs - 2017 is on course to be the best-ever for ETF inflows - but there's a lot of work. Investors need our help - guiding them through different options, helping them with trading, updating on the changes to our range. It's paying off so far. We've taken on a lot of new investors, and we've won more business from our existing relationships. But we can't rest on our laurels.
What does David see as the opportunity in ETFs in the UK and Ireland?
DL: From the investor side, the ETF opportunity is in objective investing. ETF use is well understood in asset allocation, targeting markets. But more and more ETFs have been launched to target investment objectives like income seeking, risk reduction and inflation-proofing a portfolio. These were the preserve of the active manager, but now ETFs can do this reliably at lower cost. From the provider side, it's about the expansion of ETF use amongst wealth managers and private banks. This is probably the fastest-growing segment of ETF use, and this will expand more with the introduction of MiFID next year. We are making sure that we are in contact with any firms looking to use ETFs for the first time - so we can walk them through the process.
In your time working in the ETF space, how do you feel the market has developed and evolved?
DL: The ETF space is always evolving. We came out of the tracker fund world - where a few dozen funds track mainstream markets. ETFs have moved a long way from that. Investors are just as likely to use ETFs for a specific sector as to buy the S&P 500. The explosion in bonds has also been notable. Some of us saw passive fixed-income growing in the early days, but few expected it would be this ubiquitous. But overall these are just details. The fundamentals of ETF investing are simplicity, transparency and low charges. That hasn't changed and never will.
Do you see the market for ETFs expanding in terms of institutional investors? How do you think the providers should best cater to the expanded interest?
DL: Active managers were once the institutional default - that has now flipped. The onus is on the manager to prove a stock-picker is worth their fee. That scrutiny will increase next year, when MiFID rules put a price tag on research. We need to be attentive to institutions' needs. They have different portfolio objectives and we need the right products to for their circumstances. They also have different service requirements - we work hard on the liquidity data, the analysis they required. Everyone is different, we can't have a one-size-fits-all mentality.