Europe’s exchange-traded fund industry has had a tough 2022 so far, and players likely will need to prioritize strategic moves such as expanding into new country markets, mergers and acquisitions, and distribution partnerships to cope with challenging times, said a Cerulli Associates report released Friday.
The European ETF industry, like much of the financial world, is contending with rising inflation, central bank rate hikes and recession fears, according to the report. Assets under management in Europe’s exchange-traded product universe hit €1.4 trillion ($1.3 trillion) in 2021 before falling 7.1% to €1.3 trillion in the first half of 2022, the report said, citing Morningstar data. At €1.2 trillion, ETF assets accounted for 93.7% of the overall European ETP universe at the end of June, the report said.
Consequently, expectations for growth have slowed and Cerulli’s research suggests managers will prioritize certain strategic moves in a bid to reverse the decline in assets, the report said.
As the European ETF market has matured, players are looking to move into new markets in an effort to find “white spaces where their value proposition could give them a competitive advantage,” said Fabrizio Zumbo, director of European asset and wealth management research at Cerulli, a global research and consulting firm, in an interview.
“In the M&A space, we have seen a move from a type of cost-efficiency-driven consolidation,” Mr. Zumbo said, “to a more strategic and long-term approach where you are not just buying other firms just to reduce the cost, but to have new capabilities.”
Partnerships with distributors in different European countries have also become a popular approach, he said.
“These distribution partnerships could enhance the footprint of international managers in different European countries,” Mr. Zumbo said.
According to the report, 37% of respondents to a recent Cerulli ETF survey plan to enter or expand their efforts in new country markets.
In addition, 37% of respondents also said they will look to M&A to build their product and distribution capacity, the report revealed. The survey also found that 31% of respondents said they plan to continue cutting fees and 29% plan to review their product lineups with a view toward liquidating or merging funds if warranted, the report said.
