Gareth Stobie discusses 10X’s plan to acquire CoreShares on ETF TV

Presented by Syntax Advisors.

Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investments. I am Margareta Hricova and joining me today is Gareth Stobie, Managing Director at CoreShares and Deborah Fuhr.

Gareth Stobie: Thank you.

Deborah Fuhr: Thank you.

Well, Gareth, exciting news with 10X Investments announcing they’re going to acquire CoreShares. Can you tell us about 10X’s business?

Gareth Stobie: 10X started roughly six-seven years before CoreShares, and their focus was to build a low cost, simple, passive retirement solution that would help clients harness the benefits of index investing over the life of a savings journey. And they developed both a corporate offering, a corporate umbrella fund structure that small corporates could use as their pension fund product, as well as, more recently, as a direct to consumer platform where individuals can set up their pensions. So on the back of this, they had developed some large passive balance funds to support that initiative and over the years have gathered over 19 billion of assets under management and a few thousand clients. So a very similar business to CoreShares’ independence, sort of challenger brand, very focused on passive low cost index markets, but they didn’t have the number of complementary product sets that we have like ETFs.

Deborah Fuhr: You started ETFs in 2012. Can you tell us about your journey?

Gareth Stobie: Like many ETF businesses, we have been looking for opportunities in the passive space. We’ve had a number of product launches over the years and been very proud of a number of first to markets opportunities. But we’ve also looked at other areas of the market, such as smart beta and so forth. I would say the biggest change in our business over those ten years has been to migrate from being a product house, which many ETF providers are seen to be, to being a fully fledged investment manager with a robust investment philosophy. And that sort of coming of age has been a wonderful journey to be part of.

Deborah Fuhr: And can you give us a sense of your current product set and assets?

Gareth Stobie: So we have 18 strategies and unit trust formats at the moment, fairly evenly split between our ETF range and our traditional CIS or click investment scheme branch. 10X has been particularly successful in the balanced fund space. We’ve been very strong running segregated accounts, ETFs, single building block funds whereas they’ve been really good at solution funds. So very neat from a client segmentation perspective and from a products inspiration perspective.

Deborah Fuhr: What do you see as a potential for the combined businesses of 10X and CoreShares?

Gareth Stobie: So as you know, scale is everything in the passive markets. Clearly, from a pricing perspective and from a cost leadership perspective, it means that you can run your business that much more efficiently. But it also gives you the head space, the capacity, the people power to grow and to grow to new areas in the market, from a product development perspective. ESG, of course, is a huge focus area globally, and that takes resources to implement properly. And so combining these two businesses that are very complementary allows us to pursue both growth opportunities and just run much more efficiently.

Deborah Fuhr: And what is your outlook for the ETF industry in South Africa?

Gareth Stobie: The ETF industry over the last five years has really grown nicely, mainly on the back of changes to regulation, allowing for much more expansive product range to give different global opportunities. Pre that we were a bit constrained from an exchange control perspective, which is archaic legislation in the global context, but important in our markets. Some of the big headaches that we are still fighting in our market is access to investment platforms, which is something I’ve got a bee in my bonnet to try and solve, because if you look at the traditional CIS markets, that’s a very large, mature market in South Africa and ETFs are largely excluded from their traditional platform markets. So linking platforms to ETFs, I think will help with the next step change in our trajectory.

Deborah Fuhr: That’s great. Thank you for that update.

Gareth Stobie: Thank you.

Margareta Hricova: Debbie. Is there any other news from the ETF industry?

Deborah Fuhr: Last week there were 19 new listings from 16 issuers and 42 new cross-listings. So year-to-date, in the first four months, we’ve had 547 new products come to market, 722 new cross-listings. There’s been 108 closures and 72 cross-listings that have been delisted.

When we look at the products that came to market last week, 21Shares has partnered with ETF Securities in Australia to bring out a Bitcoin and Ethereum ETF, and Cosmos AM has partnered with Purpose Investments to bring out a Bitcoin ETF in Australia.

Invesco has brought out a China A-Shares 300 and a China A-Shares mid-cap. The other products are again around ESG and thematics exposures.

If we look at the data for the end of April in terms of flows in assets, because of the market move, the assets have gone down to $9.3 trillion. What we have seen is that we’ve had 35 consecutive months of net inflows and we’ve had $31 billion of net inflows during the month of April.

There’s now 630 issuers. ETFs are listed on 80 exchanges in 63 countries. And when we look, the majority of money has been going into equities up until this month. In April, we saw money going into fixed income predominantly and slight outflows from equities.

We have seen money going into gold as an inflation hedge and safe harbor. And we’ve also seen that the US actually had net outflows. Globally, as I said, there were net inflows of 31 billion. But the US ETF industry did have net outflows last year. So it does show how investor sentiment is quite different if you dig into the numbers from different perspectives.

Margareta Hricova: Thanks again to our sponsors, Syntax Advisors and of course 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.

Published on May 18, 2022