Mutual funds will become legacy products within 15 years, with ETF assets in Europe set to treble within the next decade, according to Hector McNeil, chief executive of new white-label ETF provider HANetf.
Hector McNeil, chief executive of white-label ETF provider HANetf.
While market share for passive assets in Europe has reached approximately 15%, the trend towards passive management continues with ETFs leading the charge. According to latest data from London-based ETF industry consultant ETFGI, Europe-listed ETFs have gathered $107 billion in net inflows this year (as of the end of November). Assets invested in Europe-listed ETFs now amount to $789bn, representing an increase of 37.9% from the end of 2016.
“While total assets in passive funds may be relatively low at the moment, we think that, with fees falling and a regulatory backdrop that is conducive to growth, ETFs’ market share could be north of 35% within 5-10 years,” said McNeil. “Crucially, if you look at the numbers now, in the US the majority of new money already goes into ETFs, and Europe is following suit. If this continues – and we think it will – mutual funds could well find themselves consigned to the ‘legacy’ bucket within 15 years.”
McNeil says that while mutual funds will continue to exist in the future, ETFs represent the “digitisation” of the mutual fund industry, with a new generation of investors embracing them as part of a wider technological shift.
“ETFs, far more than traditional mutual funds, are attractive to the next generation of savers and investors who will do everything via their mobile phone and are used to transacting immediately for every product,” he said. “Many new solutions such as robo-advice are also taking a ‘passives-only’ approach when building propositions and we believe active managers will either move to launch new ETFs, or they will merge mutual funds into ETFs, or at least have more characteristics of them.”
McNeil launched HANetf earlier this year alongside partner Nik Bienkowski. The firm provides a turnkey solution for the growing number of US and Asian ETF issuers and traditional asset managers seeking to enter the ETF market in Europe, through a platform which offers services including product development, compliance, operations, capital markets, sales, marketing and distribution.