BlackRock (NYSE: BLK), the world’s largest asset manager and parent company of iShares, the world’s largest issuer of exchange traded funds, is looking to expand its footprint in the European ETF market by convincing traders to drop more expensive derivatives products for ETFs.
“The cost of holding a Eurostoxx 50 future, for example, has climbed from an average of 0.07% of the contract value since 1998, to an average of 0.45% over the last year,” reports Juliet Samuel for the Wall Street Journal, citing BlackRock data.
The cost of holding futures contracts has risen due to increased regulatory scrutiny. Pricier cost of futures ownership comes as more ETF providers are trimming in fees in an effort to lure investors’ assets. [ETF Fee Cutting Arrives in Europe]
Europe’s ETF market shares another thing in common with U.S.: Dominance by a small number of players. While BlackRock’s (NYSE: BLK) iShares, State Street’s (NYSE: STT) State Street Global Advisors and Vanguard hold the bulk of U.S. ETF assets, in Europe it is BlackRock, Deutsche Bank (NYSE: DB) and Societe Generale’s Lyxor unit.
“Research finds that although ETFs and ETPs listed in Europe suffered net outflows of US$3.1 Bn in September they gathered a record US$47.4 Bn in net new assets through the end of Q3 2014, surpassing the previous high of US$28.0 Bn set in the first three quarters of 2011. The European ETF/ETP industry had 2,081 ETFs/ETPs, with 6,233 listings, assets of US$455.8 Bn, from 51 providers on 26 exchanges,” according to London-based ETF research firm ETFGI.
“BlackRock is eager to draw more money into iShares. Nearly $18 billion left its active equity funds in the first nine months of this year, where $35 billion went into its iShares equity funds,” according to the Journal.
The compound annual growth rate of Europe’s ETP market over the past decade has been 35.2%, according to ETFGI.