The past week saw Europe’s three largest issuers all expand their global equity ETF offering.
BlackRock was the latest to launch after it unveiled the iShares MSCI World Swap UCITS ETF (IWDS) and joins Invesco and DWS in offering global swap-based strategies.
The ETFs do not pay withholding tax on dividends – as the substitute basket of the ETF is restricted to non-dividend paying stocks – meaning it delivers a lower annual tracking difference versus its physical counterparts.
With a total expense ratio (TER) of 0.20%, IWDS becomes the second cheapest on the market, sitting behind Invesco’s product at 0.19% and ahead of DWS’ at 0.45%.
It comes after Amundi revealed Europe’s cheapest all-world ETF last week, undercutting the Invesco and State Street Global Advisors (SSGA) offerings, with fees of 0.15% and 0.17%, respectively.
Meanwhile, DWS launched Europe’s first MSCI World ex-US ETF. HSBC Asset Management also extended its product range with the launch of a Paris-Aligned Benchmark (PAB) real estate ETF.
Hedge funds poised to enter ETFs
White-label issuers are seeing increased demand from hedge fund managers looking to enter the ETF market with their own strategies.
Driving the growth is the boom of the active ETF market in Europe. Lisa Mantil, global head of Goldman Sachs ETF Accelerator said fund managers are realising there is an opportunity cost of not being in the space.
The ETF vehicle also presents a neat option for hedge fund managers looking to capitalise on the liquidity benefits of the fund structure.
Fixed incomes flows fade
Bond ETF posted their leanest month of inflows “in years” in February as markets reassessed their expectations of rate cuts in 2024.
Data from Invesco revealed that fixed-income ETFs saw $2.8bn inflows in February versus $8bn in January.
Paul Syms, head of EMEA ETF fixed income and commodity product management at Invesco said reasons for weaker flows were primarily pinned to “stronger economic data pushing back rate cut expectations” alongside “putting upward pressure on bond yields”.
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