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Will M&A Spree Hit European ETF Market?


BlackRock (BLK), the world’s largest asset manager and largest exchange traded fund provider, just got bigger after acquiring Credit Suisse’s ETF line. While mergers and acquisitions in the space is rising, the number of participants is slowly diminishing, especially in Europe.

Hector McNeil, former managing partner at ETF Securities , the fourth-largest provider in Europe, and current co-chief executive at Boost ETP , an European provider of inverse/leveraged products, expects a 30% dip in the number of ETF providers in Europe, notably among bank-owned sponsors, reports, Chris Newlands for Financial Times. [BlackRock to Acquire Credit Suisse ETF Business: Report]

Meanwhile, BlackRock and State Street Global Advisors will likely acquire the mid-sized issuers, “taking out the competition and increasing market share considerably,” McNeil said in the article. “It was inevitable that there would be consolidation in the ETF market, both in terms of the number of providers and the number of products. We have been forecasting that for some time,”

While the Credit Suisse deal was big, it is hardly the catalyst for increased M&A activity.

“One transaction does not represent a game-changer for the market,” Reinhard Bellet, head of passive asset management at Deutsche Bank’s asset and wealth management division, said in the article. “There has been M&A activity in the ETF market in the past and there will no doubt be more activity in the future.”

Globally, ETF products hold over $2 trillion in assets under management, and almost 70% is held under iShares , SSgA and Vanguard . In Europe, iShares, Deutsche and Lyxor account for more than 60% of the market, before BlackRock’s purchase of Credit Suisse.

“In any industry that is evolving it is not unusual to see some consolidation leading to greater efficiencies for investors,” Joe Linhares, head of iShares for Europe, the Middle East and Africa, said. “Without it, fragmentation can become an issue.”

However, others point to a potential monopoly forming, especially with iShares’ “quasi-monopoly” that would not be beneficial for investors, Gordon Rose, ETF analyst at Morningstar, warned.

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.