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Is the European ETF Industry Too Concentrated?


Only a handful of money management firms dominate the exchange traded fund industry in Europe. The business is consolidating further, leaving some observers worried about the diminishing competition.

BlackRock , the firm behind the iShares ETF brand, is expected to finalize its acquisition of Credit Suisse’s ETF business in June, reports Lee Davidson for Morningstar. [BlackRock to Acquire Credit Suisse ETF Business: Report]

Consequently, iShares is expected to make up  43% of European ETP assets, followed by Deutsche Bank’s db X-trackers with 13% of the market and Lyxor at 11%.

The Herfindahl-Hirschman Index, which is commonly used to measure industry competition, is currently at 0.22, signaling a moderate concentration, but could rise to 0.27, a high degree of concentration, once BlackRock acquires Credit Suisse’s ETF business.

Nevertheless, the ETF industry’s lower barrier to entry in Europe compared to the U.S. has attracted many new players.

For instance, in the European market, Finex Capital Management launched its first ETF based on Russia’s corporate bonds and plans to launch others aimed at Russian stocks. Vanguard also expanded its Europe-listed ETFs. First Trust also plans to put its AlphaDEX ETFs on London and Dublin exchanges. Moreover, Boost ETP , Lyxor and Ossiam all show interest on listing products in Switzerland.

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.