HANetf: Mutual funds ‘will be legacy products’ within 15 years
Mutual funds will become legacy products within 15 years, with ETF assets in Europe set to treble within the next decade, according to HANetf’s Hector McNeil.
McNeil, who with Nik Bienkowski recently founded HANetf – Europe’s first independent full services third-party provider of UCITS ETFs – says that while the market share for passive strategies in Europe has reached c.15%, it could treble within 10 years, with the accessibility and increasing range of investment choices available via ETFs poised to usurp mutual funds.
“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,” he says.
“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 future, ETFs represent the “digitisation” of the mutual funds 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.”
“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.”
HANetf will provide 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.
The business recently completed a seed funding round including investors such as Peter Thompson, co-founder of Source ETF, and Point72 Ventures, the early-stage venture capital strategy funded by Steve Cohen.
 Source, Morningstar, January 2017 http://media.morningstar.com/uk/MEDIA/Asset_Flows/Morningstar_Direct_Asset_Flows_Commentary_Europe_Jan_2017.pdf