The ETF ‘Death List’

June 11, 2012

Our colleagues at Lipper have put together some eye-catching data on developments in the ETF industry. You can read the slides here.

Most intriguing is the idea of a slumbering cohort of 241 exchange-traded funds forming what Lipper calls a ‘Death List’; ETFs which are more than three years old, but which have failed to drive assets up to the 100 million euro-mark.

Detlef Glow, Lipper’s head of Research for EMEA, notes these funds might well be thought to be under review by their promoters, but he hasn’t spotted any particular trend towards consolidation. Why?

Well, Glow reckons the question of whether an ETF is proving profitable doesn’t quite come down to a simple volume/management fee play; creation fees and redemption fees play their part too. And promoters like a full stable. Even if an ETF isn’t pulling in punters by the cart-load, they see value in presenting clients with an impressively exhaustive product suite.

All that means Glow isn’t convinced this group is as ripe for consolidation as it might seem. Maybe ‘Death List’ starts to look a bit melodramatic, but successfully marketing ETF data takes some creative gumption. And it’s in the headline to this post, so who am I to judge?

Perhaps more interesting is evidence of a major switch round in asset gathering by ETF product launches in the first part of this year. Take a look at the following pie charts. The first shows assets gathered by new product launches in 2011; the second AuM reaching funds launched in Q1 2012.

 

 

Data that hasn’t made it into the Lipper slides include the nugget that about two-thirds of the hefty fixed income AuM in Q1 made their way to German bunds. No surprise there.

What’s also noticeable is that despite the flow of money shown above, the number of new bond ETF product launches still lagged equities by a significant amount in the first three months (19 to 31) which to my simpleton’s eye looks like a huge opportunity for the fast movers. Maybe when the Q2 data is out, we’ll see which ETF player made the most of the low-hanging fruit among an ever-growing breed of risk-averse investors.

 

 

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