A white paper entitled The Transatlantic Divide in ETF Distribution Practices looks at how ETF buying patterns are very different when funds are listed on European exchanges.
Among some of the main differentiating factors the white paper looks at are that there is a strong institutional presence in the European market, with approximately 80 per cent of ETFs in the hands of institutional investors.
There is no requirement for individual investors to manage their own social security investments due to a strong national pensions culture. There is control of fund distribution by banks in many European countries. There is a preference in some markets for property or cash, despite low interest rates and there is the lack of a single unified market with just one regulator.
The white paper highlights many of the issues ETF managers need to consider when launching in the European market, the authors say. The market looks very different from the retail and brokerage-driven one in the US, and the emphasis for US ETF managers looking at a European distribution strategy should be making sure they are working with the right partners.
“We work with ETFs in both Europe and the US, so have evolved a good grasp of some of the operational and regulatory demands that are placed on ETFs in these differing markets,” says Dave Shastri, Head of Strategy at Truss Edge. “Just because an operation has succeeded in one market does not mean it will immediately gain traction in the other. It is important that fund managers work with partners who have the experience and infrastructure to assist with a successful launch. It is very tough going it alone.”
“Getting the right team in place to staff your local sales and distribution activities is essential for ETF launches,” says Andrea Murray, Head of ETF Business Development at Blackwater Search & Advisory. “The multi-lingual nature of the European market means fund managers need to look at hiring teams which are comfortable with operating in markets where English is not the first language, and where cultural mores around investment are different from the US. When launching product in a new market, a copy and paste approach is a non-starter which is why firms like Truss Edge and Blackwater Search & Advisory can successfully help guide asset managers through the intricacies of each market.”