The total expense ratio (TER) of an ETF is a measure that sums up the management fee of the ETF plus all other expenses paid by the ETF. Therefore, an analysis of the Total Expense Ratios is more meaningful than a quick comparison of management fees. Even though the TER is a competitive measure, it has some flaws since there are costs which are not covered within the TER. In addition, there are costs for buying, selling, and holding an ETF. All the missing costs are displayed in the total costs of ownership (TCO). Since some of these costs depend

One of the claims for multifactor ETFs is that these ETFs are combining different factors to overcome the timing issues investors face when using single factors. In addition to this one may also think that the usage of multifactor ETFs might help to reduce the risk within the portfolio. To see if these multifactor ETFs can keep up with the expectations of the investors, we have analyzed the segment of  multifactor ETFs within the peer group Equity Global. Here are the facts: There were eight multifactor ETFs within the peer group Equity Global available in the Lipper database. Three of

European investors were generally in a risk-on mode over the course of 2021 which could be seen by the fact that equity funds were the best-selling asset type overall. In fact, 2021 was a superb year for the European fund industry as the promoters of mutual funds and ETFs enjoyed record inflows (€724.1 bn) over the course of 2021. These inflows come despite the unclear economic situation caused by the ongoing COVID-19 pandemic, disruptions in the delivery chains of some industry sectors, and steadily rising inflation. That said, it is remarkable that 2021 was the second year in a row

When exchange-traded funds (ETFs) were introduced in Europe in the year 2000 it was hard to predict that these products would write an unbroken success story for more than 20 years. This becomes especially true when one is taking into account that the last two decades saw so many so-called “black swan events” in the financial markets—like no other period before—and each of these events had the power to derail the ETF industry from their growth track. But ETF assets increased during rough market periods—times during which common sense would dictate that active managers would have an advantage over passive

After iShares, the largest ETF promoter in Europe, returned to using synthetic replication with the launch of a swap-based ETF on the S&P 500, I published my views on this move in the Monday Morning Memo called “A New Dawn for Synthetic ETFs in Europe”. I believe this move might be a game changer regarding the usage of synthetic replication in the European ETF landscape. A brief review of the historic trends around the usage of replication methods in the European ETF industry shows that synthetic index replication was widely used in the European ETF industry up until 2011. This

Analysts are becoming bullish on semiconductor equipment companies, which can be seen in upward revisions to many of the group’s constituents within the Russell 3000. Year-on-year (Y/Y) earnings rates are expected to improve going forward and become positive in the first quarter of 2020. The chart above shows the Y/Y revenue and earnings growth expectations as well as the EPS revisions for several of the Russell 3000’s semiconductor equipment constituents. Seventy-three percent of the semiconductor equipment companies within the Russell 3000 have reported 19Q3 earnings. In aggregate, earnings have come in 10.8% above expectations, while revenue have come in 2.9%

Asset managers and investors are waiting for the new European Union Commission to be assembled because they want to know what they can expect from the new EU government regarding upcoming financial industry regulation. One thing that is already clear is the EU action plan on financing sustainable growth will be one of the drivers for new regulations. For example, the requirements with regard to reporting duties on sustainable activities will be translated into a formal format. In addition, it is also clear the current action plan was only the first step with regard to fostering sustainability within the financial

Last week, I came across the blog “Poor Broker Performance Reviews Leaving Fund Managers in the Dark” by Peter Rippon, the CEO of OpenGamma. This blog is based on a study conducted by OpenGamma around the topic of the use of reviewing processes and best practices to evaluate the performance of brokers and the resulting transaction costs within mutual funds. Even as the study was not conducted in a representative format, since the population of surveyed asset and fund managers was only 22, I would assume that the results can be used as a proxy for the wider asset and

The European asset management industry had a rather rough start in 2019. In regard to this, it is not surprising there is a lot of discussion around current sales trends. From my perspective, these discussions may lead in the wrong direction since sales trends are often driven by the respective market environment and, therefore, are not under the control of the fund promoters. That said, there are topics which can make a difference between the single fund promoters and, therefore, drive sales. One of these topics is the discussion about fees and expenses. Some asset managers complain about increasing regulatory

Undertakings for Collective Investments in Transferable Securities (UCITS) is a well-known brand for mutual funds and ETFs, and investors all over the world appreciate the regulation scheme. Investors from inside and outside the E.U. expect that all funds under the UCITS regulation are treated the same. But are all UCITS funds really treated equally? Obviously not, since the UCITS regulation was created to leave room for the needs of local markets in the E.U. The UCITS regulation creates a minimum standard, and local regulators can extend this basis with stricter rules or adopt local rules if they don’t interfere with

Fees and expenses in the mutual funds industry are a hot topic for investors and market observers around the world. In some cases discussions are going so far that one could get the impression that fees and expenses are the only criteria an investor should use when selecting a mutual fund or ETF. These discussions have recently been fueled by media coverage of the launches of some low-cost funds by large asset management groups. Fees and expenses, especially for actively managed funds, have been under scrutiny for a while, since a large number of actively managed funds have not beaten

Within the European fund industry calculation of fund flows is quite common, since market observers, fund associations, and even fund promoters publish and comment on these numbers to showcase the success of the fund industry and/or single products and to comment on current trends in Europe. But for fund promoters it is often a riddle as to why investors are buying a specific fund, given its performance. That said, a few companies—mainly consultants—look behind the scenes at the fund level to try to determine the main drivers of fund flows to help their clients gain inflows to their funds. With