It was a double celebration today at the London Stock Exchange for UBS – not only did the firm’s global asset management arm officially roll out its first suite of ETFs, but the Swiss bank is also celebrating its 150th anniversary.
Today’s landmark event saw the launch of 64 ETFs, the largest number admitted to trading in a single day on the exchange. The range of products spans equities, fixed income, commodities and alternatives, giving investors exposure to a number of different indices licensed by the likes of FTSE, Euro STOXX, Standard & Poors, MSCI and Markit iBoxx.
“The London Stock Exchange and UBS have a long partnership and we’re pleased to be embarking on a new adventure with them. Their success is part of our own innovation and expansion,” said Chris Gibson-Smith, Chairman, London Stock Exchange.
Ian Barnes of UBS, filling in for John Fraser, Chairman and CEO of UBS Global Asset Management who fell victim to London’s traffic, noted that with invested global assets of around GBP400billion, the firm was not only one of the world’s largest asset managers, the fact that it offered passive and active strategies helped distinguish it from its peers.
Said Barnes: “We recently won a mandate from NEST to manage the passive global equities part of their fund and run segregated passive mandates for a number of large clients. In Europe we were one of the first ETF providers and our aim is to be prominent in four key markets – Switzerland, Germany, the UK, and Italy.” He added that there were plans to launch in Italy later this year.
Clemens Reuter (pictured), Head UBS ETF, UBS Global Asset Management, went on to provide details of the ETF products. He said that the full suite of ETFs (which actually totals 66 ETFs as two test products were launched last week to ensure operational integrity) represent a combined GBP3.5billion in AUM. The vast majority – 49 of the 66 – are cash-based ETFs, the other 17 being synthetic, swap-based ETFs. Authorised participants for the physical ETFs are UBS Investment Bank London, Commerzbank Frankfurt, Deutsche Bank Frankfurt and Deutsche Bank London. UBS Investment Bank London is used for the swap-based replication ETFs.
“You might ask why now? Why not earlier? Well, London is a very large, competitive market. We needed to ensure we had a critical mass of products to satisfy UK investors (before launching),” said Reuter.
The ETFs use a unique share class model explained Reuter. “We have an ‘A’ share class for the retail market and an ‘I’ share class for institutional and HNW investors.
The majority of the 66 ETFs now offered by UBS GAM fall into equities, with investors now able to get exposure to global, North America, Europe, Asia and equity thematic strategies such as infrastructure, global rare earths and socially responsible ETFs. Indeed, the UBS STOXX Global Rare Earth ETF is the first ETF of its kind in Europe.
Recognizing the growth in fixed income, Reuter added: “We have launched nine fixed income ETFs into the UK market.” A range of alternative ETFs based on the HFRX index are also available.
Reuter was certainly bullish on the firm’s commitment to the ETF space. He commented: “Our ETF growth is outstanding. We are growing at a much faster rate than the industry average in Europe.”
As well as being landmark moment for UBS, today’s event was also important for the LSE itself: today’s listing took the overall number of ETF products beyond 1,000 (to 1,006), a key milestone for the exchange.
Pietro Poletto, Head of ETPs at London Stock Exchange Group was separately quoted as saying: “When we look at Exchange Traded Products over the last twelve years we see a fantastic story of growth and diversification. There are now over a thousand products traded on LSE…UBS’s new funds further strengthen London’s vibrant ETP marketplace, the most diversified of its kind in Europe.”
To conclude the event guest speaker Debbie Fuhr, partner of ETFGI LLP – which provides independent research and consultancy to the global ETF industry – welcomed the fact that another ETF provider in UBS GAM was coming to market to help educate investors.
Illustrating just how fast the ETF space had grown, Fuhr said: “In the US the ETF market started in 1993 and in 2009 we saw the industry break through the USD1trillion barrier. It took just 18 years, compared to 60 years for the US mutual funds market.”
She noted that whilst net inflows in 2012 were similar to last year (just over USD168billion), mutual funds had experienced negative net outflows. “In 2008 everyone became worried with counterparty risk and they switched to ETFs because of the intraday ease of getting in and out of markets. What we find, therefore, is that investors tend to embrace ETFs during periods of market stress.”
Fuhr added that things like RDR and MiFID II “would be beneficial to the ETF industry” as trade reporting would give investors more comfort. As well as increased use by retail investors and financial advisors, Fuhr sees platforms becoming an additional source of continued growth in the European ETF market.