• Andrea Murray

ETF Issuer Merger Talks Continue to Dominate Headlines


More big news last week with State Street Global Advisors once again in the headlines, this time around a possible merger with Invesco. Flow data is quiet but plenty of global ETF launches and Dimensional continues with additional active ETF launches in the U.S. Read on for more ETF highlights from the week.


Fund Launches and Updates


EUROPE

DWS is set to change the index of its Europe mid-cap ETF to one that incorporates ESG metrics while also slashing fees on the product. Effective 20 October, the £39.6m Xtrackers MSCI Europe Mid Cap UCITS ETF (XEUM) has been renamed the Xtrackers MSCI Europe ESG Screened UCITS ETF. In addition, DWS has more than halved the total expense ratio (TER) from 0.25% to 0.12%. Link


Lyxor has expanded its fixed income ESG ETF range with the launch of a corporate green bond strategy. The Lyxor Corporate Green Bond UCITS ETF (PLAN) is listed on the London Stock Exchange, Deutsche Boerse, Borsa Italiana and Euronext Paris with a total expense ratio of 0.20%. Link


Swiss digital asset issuer Valour has expanded its ETP suite with the launch of a solana ETP. The Valour Solana (SOL) SEK ETP listed on the Nordic Growth Market stock exchange on 16 September. Link


In the continuing trend of mergers and index changes to ESG, the €314m VanEck Vectors Global Equity Weight UCITS ETF (TGET) will merge into the VanEck Vectors Sustainable World Equal Weight UCITS ETF (TSWE), creating a €408m global ESG ETF, effective 15th October. In an interview with ETF Stream, VanEck said the reason for the decision was due a string of outflows from TGET over the past five years. Link


THE AMERICAS

Dimensional Fund Advisors has been at it again, listing two non-US-market ETFs on the NYSE, extending the firm’s offering of systematic active transparent ETFs. With a current total of nine listed equity ETFs, Dimensional has further solidified its position as one of the largest active ETF issuers in the industry, with more than $40 billion in combined ETF AUM. The firm plans to launch fixed income ETFs later this year. Link


U.S. listings last week:


Source: Link


In Brazil, First Trust announced that it has engaged Banco B3 S.A. to list Brazilian depositary receipts backed by 13 First Trust ETFs in Brazil. Link


Flows


Flow news was quiet last week so instead we are sharing an interesting chart from the Bloomberg ETF Intelligence team showing ETF issuer rankings:




Noteworthy


Significant news in the industry continues as U.S. lawmakers propose a bill that would potentially strip ETFs of a key tax advantage that has helped fuel the industry’s momentous growth. Unsurprisingly, some of the larger issuers like BlackRock and State Street have criticised the draft legislation over concerns on negative impact on investors. The draft legislation would result in ETF investors being required to pay capital gains at the end of each tax year for these investment vehicles similar to current tax treatments in the U.S. for mutual fund investments.


Another outcome is that some investors may increasingly adopt tax-managed accounts, such as “direct indexing” which has been gaining ground in recent years among investors as technology has broadened access. Either way, bills take months if not longer to be passed through the House and Senate which will run us up through their December holiday break. So we won’t be holding our breath on this one, at least not until 2022. Link

Another big news item that we doubt anyone missed – reports that State Street Global Advisors and Invesco are discussing a possible merger. The FT report claims this is a sign of financial pressure in the industry and that size and first-mover advantage offer little protection from never-ending price wars. Additionally, State Street is looking for ways to edge out their competition to reclaim higher market share. However, a completely different spin from an Invesco standpoint comes from Ben Fulton, one of the early pioneers of PowerShares and previous Global Head of ETFs at Invesco. His July article is worth a read here.


Recent filings show that Fidelity Investments urged the U.S. Securities and Exchange Commission to approve its Bitcoin exchange-traded fund in a private meeting, listing the virtues of an idea that the regulator has been slow to embrace. They laid out reasons why the regulator should approve the proposed product, including increased investor appetite for virtual currencies, the growth of Bitcoin holders and the existence of similar funds in other countries. Link


Additional interesting reads:


In Asia, the Hong Kong stock exchange unveiled a new fund-of fund ETF that offered investors direct exposure to an asset in mainland China and reflects the rising enthusiasm among investors for tapping into ETFs in mainland China, where so far this year 155 new products have already been issued. Link


More focus last week, this time through ETF Edge of CNBC, laying out the possible threat of direct indexing to the ETF industry and why it is said to be attracting so much attention as a new form of investing. Link


Disclosure: This newsletter consists of curated articles which we have read across the globe and while we can't include every ETF related news item, we would like to hear your thoughts on something we may have missed that you feel is important. All information is sourced from 3rd party media outlets, not our own material and should also not be viewed as financial advice.

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