While the pace of new ETF launches in the U.S. seems to have slowed a bit as the summer creeps along, the industry is definitely still booming across the pond, with one of the largest players in the European ETF market announcing plans to launch 30 new exchange-traded products in the second half of 2009. Deutsche Bank, which maintains the popular line of “db x-trackers,” is making the move to meet strong demand for ETFs from investors. “What is interesting for the industry is not only that last year but also so far this year the European ETF industry has been extremely successful, with a bit under 10 billion euros in inflows over the first half,” said Thorsten Michalik, head of db x-trackers.
Deutsche Bank is currently the third largest ETF provider in Europe by assets under management. World leader iShares holds the top spot in Europe as well, followed by Societe Generale’s Lyxor Asset Management. Michalik said that db x-trackers will have 150 exchange-traded products by the end of 2009, and could reach 200 in 2010, a level that the firm believes may be sufficient to provide thorough coverage of of all major asset classes. In the U.S., Deutsche Bank partners with Invesco PowerShares to offer a variety of exchange-traded commodity products.
Decision Time In Europe
Michalik believes the ETF industry in Europe still has room for significant growth, estimating that we could see 1,000 ETFs (from a current level of 600) within the next few years. But while he expects that new issuers will continue to enter the space with unique fund offerings, he also believes that some issuers may decide to pull out of the ETF industry in the next few years if they aren’t able to reach certain target asset levels. “It depends on what type of fund you have, but it costs around 70,000-150,000 euros to keep an ETF going,” he said.
The U.S. ETF industry finds itself in a similar position, with several small ETF issuers offering a number of relatively small funds that likely border on breakeven. It will be very interesting to observe the number of new fund issues and closures over the coming months, as issuers continue to jockey for position.
Disclosure: No positions at time of writing.