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ETF market set to consolidate, executives say

EUROPE – The exchange traded funds market is set to consolidate, according to some of the sector’s leading executives.

“There has to be a rationalisation,” said Deborah Fuhr, executive director at Morgan Stanley and widely seen as a leading figure in the ETF field. “You don’t need six of the same products out there.” She said the sheer number of funds in Europe meant they stole liquidity from each other.

She was speaking at a debate on ETFs organised by International Fund Investment and sponsored by the London Stock Exchange and Barclays Global Investors. Tim Bevan, product manager at the London Stock Exchange, added: “A proliferation of funds is not necessarily a good thing.”

Bevan said that having hundreds and hundreds of funds was “not a good situation” – it needed to consolidate. He saw the industry getting “leaner and fitter”.

Bruce Lavine, head of BGI’s iShares ETF arm in Europe, agreed. “I’m with Tim in that the industry needs to consolidate.”

There needed to be an improvement in the “educational support behind the funds”. The lack of this support “can detract from the product”.

“I do think consolidation is a good outcome here.”

ETFs are instruments that allow investors to trade an index like a stock. The market in Europe is worth more than €30bn, Fuhr said. The panelists said the market could grow to up to €45bn by the end of next year.

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