2018 saw BNP Paribas Asset Management’s ETF and Index Solutions division raise significant assets, closing the year with EUR13.7 billion in assets under management in its ETF and open-ended index funds.
Isabelle Bourcier (pictured), Global Head of Quantitative and Index at BNP Paribas Asset Management, explains that despite a 4.3 per cent decline in the European ETF/ETP market, net new money raised over 2018 was close to EUR3 billion.
Assets flooded into BNPP AM’s environmental, social and governance (ESG) and socially responsible investment (SRI) offerings, plus the S&P 500 ETFs and index funds.
The firm has the original low carbon ETF, the BNP Paribas Easy Low Carbon 100 Europe UCITS ETF, launched in 2008. The fund’s objective is to track the performance of the Low Carbon 100 Europe index, investing primarily in securities with two objectives, reducing the carbon footprint of the portfolio and helping investors finance the energy transition by shifting investments towards companies that are the most pro-active in reducing their CO2 emissions.
This product has grown to assets of EUR430 million. “It’s right in terms of thematics and timing,” Bourcier says.
“A lot of distributors, advisers and discretionary fund managers are developing and selling sustainable funds,” Bourcier says. “We also see it in continental Europe in the robo-advisory sector. There is more and more demand for SRI ETFs and we are often in meetings with large distributors that are increasing their assets in an SRI passive offering, either in ETFs or in open-ended index funds.”
The process starts with a clarification of terms and objectives: a mix of exclusions, impact and engagement, Bourcier observes. The minimum exclusions are the UN’s Principles for Responsible Investment (on human rights, labour rights, the environment and corruption) but some of Bourcier’s clients have their own further restrictions.
“You need to understand what is important for clients,” Bourcier says. “You also need to understand what is important for portfolio construction as you can end up with portfolios which can be very concentrated, leading to tracking error versus their traditional benchmarks.”
Bourcier also has clients who have customised their SRI needs in dedicated mandates. “Some clients have very specific exclusions like animal fur. You have to make sure the data is available but usually they are on common ground around weapons, coal, alcohol and tobacco.”
Apart from ESG funds, Bourcier has observed that clients are more defensive. “We see demand from clients for single factor ETFs in low volatility and quality,” she says.
Bourcier’s Index Solutions sales and marketing team has also seen an increase in numbers over the last year, expanding from six to nine.