More than 260 fund groups offer ETFs in the US but just 60 in Europe, according to Bloomberg data.
Jamieson believed the gulf was caused, in part, by many US issuers being wary of entering the more complex European market, with its multiplicity of markets, regulators, exchanges, languages, taxes, currencies and distribution rules.
The most recent US entrant, Janus Henderson, went to the extent of buying a smaller European issuer, Tabula Investment Management, to expedite its entry into the market. Cathie Wood’s Ark Invest took the same path last year when it bought Rize ETF.
Jamieson believed many US ETF issuers that did not want to go down the acquisition route had held back from entering Europe.
“They have a lack of expertise and a lack of resources [in Europe]. They don’t know how long it’s going to take and they certainly don’t know how much it’s going to cost them,” he said.
Citi’s platform will differ from existing white-labellers in providing a wider range of services, given that the bank is already an authorised participant, market maker, swap counterparty, depositary, custodian, paying agent and transfer agent for ETFs.
“The one remaining gap was the ability to launch products for other people. We see this as the final part of the puzzle,” Jamieson said. “It’s a one-stop shop”, providing economies of scale and reducing the product launch timeline from one or two years to three to six months, Citi said. It declined to be drawn on the pricing structure for the platform.
“Citi Velocity ETFs enables asset managers to focus on their core responsibilities: product idea generation, portfolio management and distribution. We feel we have got a better mousetrap, a better solution,” added Jamieson, who said Citi had been working on the project for two years.
Deborah Fuhr, chief executive of ETFGI, a consultancy, welcomed the launch and saw potential for growth.
Among US ETF issuers, “everyone is contemplating whether they should launch Ucits ETFs”, Fuhr said, pointing out that US-domiciled ETFs are not tax-efficient for non-US investors. “[They are thinking about] how they should come to Europe as a gateway to the world. Ucits ETFs travel better.”
However, she said asset managers needed to factor in the cost of using a platform and the portability of their ETFs if they ever decided to bring them in-house.
Fuhr added that a platform such as Citi’s did not help with distribution, which was “one of the biggest challenges” for ETF issuers.
Jamieson was hopeful these obstacles could be overcome. “The number of active ETF issuers in Europe is set to double or triple, as Europe catches up with the US.”
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Publish date : 2024-10-23 21:00:00
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