What a difference a year makes

It has been a dynamic year for both the ETF industry and ETFM, with the magazine recently celebrating its first anniversary amid a plethora of market developments. The announcement in June that BlackRock was to acquire Barclays Global Investors (BGI), the parent company of the world’s largest ETF issuer, certainly captured the industry’s attention and provoked much speculation surrounding the potential impact upon the iShares range.

Meanwhile, a wave of new market entrants has swept into the ETF landscape this year, with some new players already making a substantial footprint. Source, the exchange-traded product provider based on a multi-partner platform, entered the market in April with a range of 13 ETFs and 22 ETCs. HSBC has also thrown its hat into the ring, unveiling a couple of products on mainstream indices, with promise of major expansion over the coming few years. At the same time, existing players have geared up their offerings. Credit Suisse has used its established Swiss base as a springboard for its Xmtch funds, launching its range into the Italian and German markets in the space of a couple of months. 

2009 has also been marked with remnants of the Lehman collapse and AIG bailout, which thrust counterparty risk to the fore of investors’ concerns. The effects are still discernible across the economy, as well as within the ETF industry. The incident with ETF Securities’ AIG-backed products last year, halting market makers for a few days, highlighted the importance of collateralisation and the need to distinguish between ETFs, ETNs and ETCs, a debate which is still being waged. 

On a structural level, last year’s events have brought attention to the swap provider in synthetically replicated products. ETF Securities and Source have unveiled models with multiple swap providers for funds, in order to mitigate counterparty risk. Other players are leveraging on the reputation associated with their in-house brand or the names of their partner banks. 

It is also important to note that this year has seen assets reach an all-time high, while the European market has developed to the extent where products outnumber those in the US, according to an ETF Landscape Industry Review. 

Tipping the pivot towards next year, it seems there is already a lot on the cards. The aftermath of BlackRock’s acquisition of BGI, finalised at the beginning of December, will be monitored by most industry players. There is also much talk of regulatory development, with the potential for the second Markets in Financial Instruments Directive (Mifid) to require the reporting of ETF trades to an exchange. Whichever way you view the market, reflecting back on the year or looking forward, the ETF industry is flourishing. 

Emma Dunkley, Deputy Editor