Deborah Fuhr Good afternoon, this is Deborah Fuhr, managing partner of ETFGI, an independent research and consulting firm. I’m excited to be part of ETF TV – a new platform to provide insights for institutional investors, discretionary fund managers, private bankers, and financial advisors on the use and trading of ETFs and how regulations is helping to evolve product development. Today’s session is going to be highlights from our recent ETFs Global Markets Roundtable, that was held on June 12th in London. A lot of the topics focused on how investors should use ETFs, how to think about trading using algos or RFQ platforms, where to trade, also some of the new products that are coming to market, and how they’re being used by investors around the world.
Sergey Dolomanov, Partner at William Fry Really, what we’ve seen has been the acceptance by the industry that passive can outperform active and that passive is a viable proposition. I think that debate has matured and moved on at this stage. And what has helped that, and particularly something that we as lawyers see from a regulatory perspective, how fund promoters structure their products. What we’ve seen is that there’s been a huge increase in the amount of passive strategies available.
Eric Pollackov, Global Head of ETF Capital Markets Invesco The innovation that we’re kind of excited to watch is sort of the cryptocurrency kind of wrapper being put into an ETF wrapper, so to speak. So there’s actually applications at the SEC to talk about things like Bitcoin in an ETF wrapper. So these types of new innovations are exciting.
Tom Digby, Head of EMEA ETF Client Trading Invesco In Europe specifically, it sort of comes back down to that understanding where liquidity is, you know, lots of volume is traded OTC and lots of volume is traded on exchange. We sort of see an 80-20% split on that. And it’s really sort of understanding where is the right liquidity for a buy-side to interact with. A lot of people go through the investment process looking at total cost of ownership in terms of tracking error management fees, trying to get better rates on withholding taxes vs different funds. Actually, what we see is, you know, trading spreads becoming a big part of that total cost of ownership. So if you’re holding a five basis points, S&P 500 and you’re trading it really inefficiently at five, 10 basis points every time, that becomes a really big difference. So what we try to do is offer a service where we try to work with our buy-side clients to help make sure that these ETF vehicles, these market access vehicles, are traded as efficiently as possible.
Dan Draper, Managing Director and Global Head of ETF, Unit Investment Funds & Closed-end Funds Invesco Actually, at Invesco, we don’t really consider it a battle, we think now that, you know, serving clients is really becoming more important on offering all capabilities. And I think it’s really the model that our senior management, led by Marty Flanagan, have put in place really over the years through organic growth and even more recently through some acquisitions to ensure we’re offering solutions that include both active and passive solutions to the clients.
Tara O’Reilly, Partner at Arthur Cox I think one of the most interesting discussions was hearing policymakers who were talking about a recognition of the fact that some of the legislation that has been put in place doesn’t have maybe an easy solution, and that we’re going to actually need to look at some policy intervention in terms of finding some of the solutions to the issues we have.
Shaun Baskett, Director, Index Sales Cboe Europe What stood out for me was the the openness of the regulator. He basically spoke today about his challenges, about the fact that he is someone who puts the laws and the regulations in place after they’ve all been decided and left to him. So I certainly learned a little bit about not quite walking a mile in his shoes, but seeing how he has to walk in his shoes, I suppose is the best way of putting it.
Dan Barnes You mentioned confidence, and that seems to be one of the issues, doesn’t it, confidence and trust in the products. Where do you think or who do you think can actually help to overcome that issue?
Ivan Gilmore, Head of ETF & Global Product Development LSE It’s a great question. You know, we joked earlier today that we’ve been trying to educate people and certainly people more knowledgeable than I, with more longstanding experience in the ETF industry about this education process, around what the product is and what liquidity it can access. So there’s still some work to do. I think what’s different now is that MiFID II has brought it into the limelight for European institutional investors.
Ciaran Fitzpatrick, Head of ETF serving EMEA State Street If you look at the US ETF market, there’s a lot of smaller players and a lot of, you know, ORAs and individuals and firms focused purely on ETFs, and you’re starting to see some of the FinTech companies coming in. In the UK, in Europe, et cetera. Will they be the ones that are 100% successful offering ETFs? Maybe not. But it’s the next level of that kind of firm, and I think, from an innovation standpoint it will make a big difference.
Dr. Xiaolin Chen, Head of International KraneShares I think the reason is more leaning towards the challenge for the asset manager to see and to know what exactly they are investing into. What is the exact underlying risk that they are taking in their ETF product? So it’s more of understanding the tremendous growth in the ETF market means that more players come to the market, more index rate providing such index for the product. As a locator, you take a step back when you see, typically, people say less is more, but now in the ETF world, in certain sectors, in the equity space, probably you are as investors, probably a little bit spoilt for choice. And that’s a good and also a bad thing, so you really have to understand the true exposures that you are getting into your portfolio.
Deborah Fuhr Thank you for watching ETF TV. To view other shows, please go to ETFTV,NET, and follow us on LinkedIn and Twitter. Thank you.