ETF providers hit back at ‘death list’ claims
ETF providers reject ‘death list’ warnings that many products are not economically viable to remain open.
Exchange traded fund (ETF) providers have hit back at claims by Lipper that they are offering a “death list” of products that are uneconomical and at risk of closure.
Lipper last week announced that 241 European ETFs were on its “death list” because they had survived for more than three years but built up assets of less than €100m (£81m) each. The ETFs had also at no point in the past 36 months surpassed that level of assets under management. The data provider declined to publish the actual list of ETFs, but Investment Adviser and FE research using the same metric found that products from db x-trackers, iShares and Source dominated the list.
Manooj Mistry, head of db x-trackers for the UK, said the firm did have smaller niche ETFs but they were offered as part of a strategy of providing a diverse product range.
“That could mean that the most popular ETFs effectively help to maintain the niche products, but it is in the interests of customers to provide the full range of exposures in ETF format, so it is worth doing,” he said.
Mr Mistry also said that as the UK’s ETF market was still relatively young, products with little assets under management still had the potential to grow.
Axel Lomholt, head of product development at BlackRock’s ETF giant iShares, also said that ETF product launches could also take time to attract assets.
He said it was necessary to look at each individual product, and consider the different systems or instruments used to manage it, to form a judgement about their viability.
“We launched thematic ETFs four to five years ago and they have grown over time, but it took time,” he said.
However, Mr Lomholt added that investors needed to carry out due diligence when investing in the products and ensure they carry out at least basic checks on their structure.
A spokesperson for Source, which has 98 ETFs including commodity and alternatives products, said the firm did not see why €100m of assets was a relevant minimum threshold for a product to remain economically viable.