Launching a successful ETF in the US is one thing. Replicating that success in Europe means navigating a very different market structure, investor base and distribution landscape.
“Plenty of US ETF issuers have come to Europe and assumed that it would be sufficient to show up at the door with a shiny new product only to be met with limited enthusiasm if there’s no pre-existing relationship to lean on.”
That’s the straightforward assessment from Invesco’s Head of EMEA ETF Product, Matt Tagliani, when we asked what US issuers most often misunderstand about launching or growing their ETF business in Europe.
According to Tagliani, cultural differences between countries and client types matter throughout Europe. He believes US ETF issuers need to remember that “client trust is key, and cultural understanding is at the heart of that.”
In other words, ETF companies can’t differentiate in Europe the way they might—or might not—between, say, the Deep South of the United States and New York City. The commercial you bought during the Masters golf tournament likely resonates similarly across America. In Europe, there’s considerably more nuance than when you’re dealing with a single national market.
Along similar lines, pouring everything into making a product sexy—tricking out an index or capitalising on a hot theme—might be less than half the battle in Europe.
As Adrià Beso, Head of Distribution at WisdomTree Europe, said, “Having experienced local teams, speaking the language, producing relevant research and understanding each country’s distribution ecosystems are often as important as having the best product.”
Andrew Keegan, Head of Product for International at State Street Investment Management, concurred: “Product innovation opens the door; distribution, client relationships, and local expertise are what actually build the franchise.”
Keegan’s analysis makes it clear why smaller issuers might struggle to launch in Europe. “Building scale in Europe requires engagement with wealth managers, private banks, insurance platforms, institutional investors, digital savings platforms, and model portfolio providers across multiple jurisdictions,” he said.
This level of work requires existing relationships or building new ones from scratch alongside setting up shop—on the ground—in key European hubs. That, of course, requires deep pockets and assumes considerable risk.
But it’s not simply establishing yourself locally and playing the relationship game. Keegan thinks “many entrants underestimate the continued importance of UCITS credibility and operational excellence.” He added that “European investors are increasingly sophisticated and look beyond product concepts to factors such as liquidity, trading quality, local support, domicile, and long-term commitment to the market.”
Brett Eichenberger, Market Leader, Asset Management at Cohen & Co.—which is preparing to bring its ETF accounting and advisory business to Europe later this year—echoes that assessment.
He cautioned that US issuers often overestimate the cachet of domestic brand recognition. “Europe is not a single, uniform market,” Eichenberger said. “It is a highly fragmented region, and launching without a clear understanding of critical differences in areas like capital markets and distribution—and aligning strategy accordingly—can become an expensive and time-consuming mistake.”
US companies bringing ETFs to Europe isn’t as easy as putting a McDonald’s on every corner or a Coca-Cola on every terrace table. Based on our conversations, one message emerged repeatedly: success in Europe requires equal parts localisation, patience and cultural understanding.
