Presented by Syntax Advisors.
Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investment. I am Margareta Hricova and joining me today is Arnaud Llinas, head of ETFs, Indexing and Smart Beta at Amundi, and Deborah Fuhr.
Arnaud, Debbie, welcome to the show.
Arnaud Llinas: Thank you, Margareta. Thank you for having me.
Deborah Fuhr: Thank you.
Margareta Hricova: So Arnaud, can you briefly describe your role and the path that took you to that current role?
Speaker 1: So I’m heading the ETF, Indexing and Smart Beta business line at Amundi Asset Management, which is based in Paris, so I used to run the business for Lyxor ETFs for the last 10 years. I used to be a market maker on ETF side before called “SocGen” (Société Générale). so I have many training and computer science backgrounds. We just finalized the operation of merger between Lyxor and Amundi. The deal has been closed on the 31st of December last year, adding the ETF business of Lyxor with the ETF indexing and Smart Beta business from Amundi, so I’m very proud and happy to lead that business now.
Deborah Fuhr: That’s great and congratulations. Where do you see the biggest opportunities for the combined entity?
Arnaud Llinas: The combination of Lyxor and Amundi ETFs is basically creating a leader, a European ETF leader. Our joint business is representing 180 billion of assets, so UCITS ETF assets.
Amundi is a player that is able to construct a deep partnership with big institutions, big banks. Lyxor is bringing innovation on the product side and agility as well. We are expecting to grow our business by 50% by 2025, thanks to those joined strengths. We are bringing together two teams, the Lyxor teams and the Amundi teams. They bring a lot of talent and expertize on portfolio management, on index construction, product construction, capital markets, and marketing. So I’m very glad and excited by this opportunity.
Margareta Hricova: And 2021 was a record year for the ETF industry, globally in Europe and in most geographies. What were the highlights for you?
Arnaud Llinas: Yes, indeed, 2021 was a record year in many aspects. You’ve been pushing the figures at ETFGI. The global ETF markets reached the threshold of 10 trillion. US market has been very strong, but Europe as well. We’ve raised more than 160 billion of assets last year, coming from 90 billion the year before. And what is very remarkable is the proportion of ESG ETF in that collection of assets; more than 55% actually was on ESG indices and inside the ESG buckets, we can see the strong emergence of climate ETFs and thematics responsible investments that both represent 10% of the market collection. So that’s outstanding and we expect this trend to continue, meaning clients switching from classical market cap weighting indices to the ESG version, having on top of it, the climate layer. We expect Europe to be the leader in that and at Amundi, we will do our best to provide clients solutions to transition to ESG and to net zero as soon as possible.
Deborah Fuhr: When you think about 2022, where do you see the biggest opportunity for ETFs in terms of products and geographies?
Arnaud Llinas: On the macro view, we are installing ourselves in a higher inflation mode that will probably stay for months across equity, maybe having the capacity to select companies that can have a power price capacity to transmit the inflation in their price. We can see that in commodity as well. They’re going to be a bigger part of the cake for multiasset allocators. And on the fixed income side we will see more flows into linkers, like the US TIPS (from iShares), but as well through fuel inflation, breakeven products, the Fed is going to increase the rates this year. The market is expecting five rate hikes this year. For sure, clients will prefer shorter duration to avoid interest rate risk, potentially taking into account floating rate notes in their allocation. In terms of sectors as well, we are seeing a lot of sectors rotation, from growth to value. The banking sector is in favor as well. So that’s interesting to see the main themes of the last four or five years starting to reverse.
But as I said earlier, underneath, the switch from market cap weighted to ESG and climate indices will continue. So that’s really our duty to propose, in every asset class, every sector, every niche of the markets, a solution that brings the ESG barometer into account. So we’re going to see volatility in the markets, high inflation, higher rates environments. So a lot of rotation in the portfolio, but probably the clients, investors, institutional investors, distributors will take the opportunity to include ESG on top of it.
Deborah Fuhr: Arnaud, thank you for joining us today and good luck with all of your goals and ambitions.
Arnaud Llinas: Thank you very much, Debbie.
Margareta Hricova: Debbie, can you talk about some of the other news in the ETF industry?
Deborah Fuhr: Last week, there were 31 new listings from 19 issuers and 32 new cross listings.
When we look at where products are coming to market, there were 10 from Canada, so we’ve seen a lot of activity there. Nine from Europe, seven from the US and five from Asia-Pacific.
Three new issuers came to market, 11 of the products were active. We had three crypto products. Many of the products were thematics. We saw Global X has come to market with six products, some in Europe, some in the US. We also saw Bank of Montreal with five new products in Canada.
I think if we look at where we are almost at the end of January, we see that there’s been 117 new listings and 98 new cross listings. There’s been 16 closures of ETFs, so net we have 111 new products in the market already in 2022.
I’m sure we’re going to see more products come to market and more innovation, so I think the themes of ESG and thematics will be something that will continue to move forward, as we also heard just now from Arnaud Llinas.
Margareta Hricova: Thanks so much, Debbie, and thank you to our sponsors Syntax Advisors, to Arnaud and to all of you for watching. To watch prior episodes and to see news from the ETF industry, visit us at ETFTV.NET.
ETF TV News does not provide investment advice, nor recommend products.