BlackRock's iShares to expand Europe ETF footprint with purchase of Credit Suisse operations.
[This article first appeared on our sister site, IndexUniverse.eu.]
Asset manager BlackRock has struck a deal to buy Credit Suisse’s exchange-traded fund business, according to a report in Reuters, citing an unnamed source. The deal would give BlackRock’s ETF arm iShares an even more dominant position in Europe, where it is currently nearly three times larger than its closest rival.
The Swiss bank’s ETF arm was first reported for sale in October last year, also by Reuters, with BlackRock and State Street cited as the likely buyers. In December the news agency said that State Street had dropped out of the bidding.
Credit Suisse is the fifth-largest exchange-traded product provider in Europe, based on year-end data from iShares’ parent, BlackRock, with $18 billion under management. iShares, the regional market leader, has $140 billion under management.
The last two years have seen ETF ranges managed by European banks lose market share to funds managed by independent asset managers, with some banks switching to physical replication from a previous policy of using derivatives to track their funds’ indices, or putting their ETF businesses—in Credit Suisse’s case, and reportedly in others—up for sale.
Increasing regulatory scrutiny of the use of derivatives within ETFs, together with pressure on banks to increase their capital levels, have dented the profitability of derivatives-based (or “synthetic”) ETF businesses.
Adding Credit Suisse’s ETF range—which uses physical replication—to that of iShares would give the BlackRock ETF unit an even more dominant position in Europe, said one observer.
“If the Reuters story is accurate,” Deborah Fuhr of research firm ETFGI told IndexUniverse.eu, “adding Credit Suisse’s physical ETF assets to iShares’ physical ETF assets would give iShares a 74.6% market share in European physical ETFs, based on ETFGI year-end data.”