ETF.com Europe’s Annual Awards

ETF.com Europe acknowledges the firms, products and support providers that are truly making a difference for investors.

ETF.com
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

 

ETF of the year
WINNER: Vanguard S&P 500 UCITS ETF (VUSA)

Vanguard S&P 500 UCITS

VUSA highlights the importance of mainstream, equity benchmark ETFs at low cost. Investors have rushed to US equities over the past 12 months as the economy has continued to strengthen in the wake of the financial crisis. This has ultimately led the Federal Reserve to consider hiking interest rates, possibly well before its Western counterparts. The Fed has only held off so far this year due to consistent deflationary pressure in the macroeconomy.

The US dollar has also risen strongly versus its major counterparts, threatening profits of large-caps but ultimately benefitting all those mid- and small-caps that generate more revenue domestically. The country has invested heavily in shale gas, using technology and domestic resources to compete with the falling oil price from OPEC producers overseas, while cheap oil has given a boost to consumer spending. Information technology and social media companies have also continued to boom.

While there have been some concerns with potentially overstretched valuations for US-based stocks, investors have continued to pile in to the market.

In line with Vanguard's company mandate, the Vanguard S&P 500 ETF provided investors with an ultra-low cost—just 7 basis points—option to physically replicate the near-12% returns of the S&P 500 Index (in local currency terms) in 2014. There are many ETF choices in this space, but few are as liquid and none are as cheap.

VUSAvs.CSPX

Best new ETF of the year
WINNER: db X-trackers Harvest CSI300 Index UCITS ETF (RQFI)

Vanguard S&P 500 UCITS

Hold your horses: The investor race for mainland Chinese equity markets has begun. 2014 sounded the gong for ETF providers to launch their A-shares ETFs, and last year alone there were four new products in this sector.

The db X-trackers CSI 300 UCITS ETF launched only a few weeks after Source's CSOP FTSE China A50 ETF, but its coverage is much broader than Source's fund. Theformer tracks the CSI 300 Index and holds the 300 largest mainland stocks, while Source tracks an index of 50 securities.

One feature of A-shares that investors can't escape is heavy exposure to financials. Even within a more diverse index such as the CSI 300, there is still about 40.5% exposure to financials. Top holdings include Ping An Insurance Group, China Merchants Bank and China Minsheng Banking.

The fund listed on 16 January, 2014 on the London Stock Exchange and the Deutsche Borse, as well as the Borsa Italiana in February. It launched in conjunction with Harvest Global Investments, a subsidiary of Deutsche Bank's Chinese asset management joint venture.

RQFI trades in GBP and USD on the LSE, and in EUR on other exchanges, and its base currency is RMB. Annual total costs are up to 1.1%.

RQFI has produced more than 14.5% returns year-to-date to 26 March and a whopping 100% over 12 months to the same date. It's also of a comforting size and has grown to more than £439 million in assets under management.

Vanguard S&P 500 UCITS

 

 

Vanguard S&P 500 UCITS

 

 

Best new EQUITY ETF
WINNER: ETFS-E Fund MSCI China A Go UCITS ETF (CASE)

The ETFS-E Fund MSCI China A Go ETF goes a step beyond the db X-trackers ETF in coverage, holding close to 450 of the largest Chinese mainland shares. It aims to capture 85% of the China A-shares market.

And what's more, it's cheaper than the similar offering from Source, and until very recently was also cheaper than Deutsche Bank's A-shares ETF. With annual fees of 0.88%—a lucky number in China—investors hunting for a bargain in elusive mainland Chinese equity markets may be pleased with this newer entrant. Although top holdings are similar in most A-shares ETFs, financials account for slightly less as a whole than its competitors at about 35% of the fund, followed by industrials at 18% and consumer discretionary stocks at around 10%.

Despite ongoing issues and uncertainties around Chinese tax agreements, this fund has reached more than £24 million assets under management since launch in May last year. At the time of its launch it had been awarded a quota of around $330 million, larger than either of the competing Source or Deutsche funds.

This ETF has also performed well at over 30% returns year-to-date to 26 March.

 

 

 

Finalist

 

 

Best new FIXED INCOME ETF
WINNER: Amundi ETF Floating Rate Euro Corporate 1-3 UCITS (AFRN)

The Amundi Floating Rate Euro Corporate 1-3 Year ETF is the first and only ETF offering exposure to a basket of variable rate, investment grade corporate bonds from the eurozone.

Precise and targeted fixed income exposure is becoming increasingly important to ETF investors in Europe for several reasons: We're facing interest rate hikes at the same time as a global deflationary environment, negative yielding European government bonds, and the looming unanswered question of how European quantitative easing will affect bonds in the medium to longer term.

This synthetically replicated ETF is also important because investors are on the hunt for yield, and corporate bonds offer more income than low yielding government debt. And with interest rate hikes up for debate, it makes sense to also hold fixed income of shorter duration.

AFRN delivered modest positive returns of 0.04% year-to-date to 26 March. Maximum annual fees come to 0.18%, and it's grown to £79.2 million since launch on 2 September, 2014.

 

 

 

ETF ISSUER of the year
WINNER: Vanguard

Finalist

Vanguard has truly stuck to its mantra of low costs and providing simple, building block products. As its assets under management go up, costs for investors come down, and we continued to see evidence of this flywheel in motion during 2014 as it proves to be one of the ETF leaders in providing cost effective solutions.

The 13-strong ETF range represents about 17% of Vanguard's European assets under management, and the lineup provides mainstream equity exposure for most familiar indexes for low headline costs.

Along with making its products more competitive, and winning ETF of the Year at our awards event, the provider has also continued to develop its index of "adviser value," which judges how much worth a client associates with its financial planner. This is part of the provider's active role in targeting financial planners and wealth managers, and educating them on the use and potential application of ETFs in their portfolios.

Although new US-based and other entrants are coming into the Europe ETF market, ETF.com is certain that Vanguard will continue to be a pioneer for many years to come.

Most INNOVATIVE ETF ISSUER INNOVATIVE of the year
WINNER: Source

Finalist

Source not only teamed up with Lee Kranefuss, one of the most innovative people in the global ETF industry, as of January 2014, to further break into Europe, it also is laying the groundwork to expand into the US.

The provider has been a key player in democratising investment by cutting fees. One major example is when it cut annual fees on its S&P 500 ETF in June 2014 to a bare 0.05%—the cheapest level in Europe.

Slashing investor cost can be achieved partially due to its innovative business structure, which includes five minority shareholders: BofA Merrill Lynch, Goldman Sachs, J.P. Morgan, Morgan Stanley and Nomura.

Source is one of the few providers to still offer successful alternative strategies to European investors, such as hedge fund strategies, volatility tracking and private equity. The provider also offers a range of popular actively managed ETFs and is known for forming relationships with new entrants to the market like active manager Ashmore.

The firm has grown from zero at launch in 2009 to more than £11 billion in assets today. The newly forged partnership with US-based private equity firm Warburg Pincus should guarantee boldness and innovation in Source's future.

 

 

INDEX PROVIDER of the year
WINNER: MSCI

Finalist

MSCI continues to steadily gather assets tracking its indexes and to innovate, especially in the realms of smart beta, low carbon, infrastructure and green bonds. It is known for well designed and well thought out indexes.

MSCI has, in fact, been a market leader in indexes for 45 years, and is now the largest indexer in terms of ETF assets (around £6.4 trillion) tracking its indexes. It now calculates more than 170,000 indexes daily, and 24 new index families were launched last year alone.

The acquisition of Barra seven years ago brought MSCI to the forefront of factor investing. The index provider now has the ability to identify and capture individual risk factors that aim to outperform over the long term versus their market capitalisation weighted counterparts, and strives to provide investors with a transparent and systematic way of tracking them. It has pushed investors to understand these risk-factor, smart beta indexes and how they can use them in their portfolio.

In addition, MSCI has been pushing people to stretch toward more complete exposure. From emphasising a transition from domestic benchmarks to the ACWI IMI (All-Country World Index–Investable Markets Index) to pushing for deeper exposure to small-caps in emerging market strategies, MSCI knows that investors have a world at their fingertips … and it's there to help.

INDEX of the year
WINNER: Nikkei 400 Index JPX

Finalist

2013 may have been a massive shock for investors when Japan's stock market soared while the currency was decimated due to Prime Minister Shinzo Abe's three-arrow economic reform program. Since then, investors have been clamouring for new ways to get exposure to Japan and are encouraged by positive economic data, improving shareholder value and the exciting prospect of large institutions allocating more assets to equities.

Here comes a new option for these Japan-hungry investors. The Nikkei 400 Index JPX is a fundamental-style index and includes return on equity measurements, governance rules and a hard 1.5% weight cap in an attempt to build a better mousetrap for Japanese exposure. Investors—notably the Bank of Japan—have flocked to it as a new standard.

It provides an alternative to the traditional, and in some cases more concentrated, equity indexes—the TOPIX and the Nikkei 225—and has become a more liquid benchmark thanks to several ETF launches in Europe that track this market as well as a new futures market in Tokyo.

Moreover, the TOPIX is an index of about 1,800 companies from the first section of the TSE, while the Nikkei Index 400 JPX is a group of 400 companies that includes younger and smaller stocks.

 

 

ETF LIQUIDITY provider of the year
WINNER: Jane Street

Finalist

For many investors, market makers are invisible. They're phantoms on the other side of the level 2 screen, taking the other side of the trade—or not—without attribution.

For the ETF industry, however, market makers are a vital part of the ecosystem. Without a good market maker, new ETFs flounder with enormous spreads. Without a good market maker, large orders move the market in unpredictable ways.

Founded in 2000, Jane Street is no stranger to the ETF business. But until recently, it had been seen as a "market maker's market maker"—a firm other large trading shops would call when looking for pockets of liquidity or for help on a complex order.

In the past few years, that's changed. In both the US and Europe, Jane Street has invested heavily in reaching out to the institutional ETF community. It has retooled its business to take advantage of liquidity enhancement programs at the exchanges, and in many cases is now the go-to shop for less liquid ETFs across all asset classes. It has slowly made a name for itself in helping put big trades through difficult or illiquid ETFs, both by putting its own capital on the line and by acting as agents to the street.

You might not yet have them on speed dial, but in 2014, there's little question Jane Street was improving your trading experience behind the scenes.

Best ETF ISSUER website
WINNER: iShares

Finalist

Investors often say the devil is in the detail, and whether you like the information you find or not, iShares ensures that there are no nasty surprises.

The iShares website is clear and easy to navigate, and delivers a very detailed breakdown of everything to do with portfolio exposure, securities lending and more.

This is extremely important in terms of educating investors, exposing them to the granular details like use of derivatives and collateral within the ETF structure, as well as telling them about the basic features of the fund. Information enables the end investor to make an informed decision, one that ultimately will have a better result in their portfolio over the longer term.

The home page avoids the temptation to cram content and looks clear and crisp, with a white, blue and green colour scheme. Investors can read the ETF Investor Guide, search for popular products or read more about iShares as a business. The "Investment Ideas" tabs allows investors to search areas by theme or asset class, instead of aimlessly browsing through a list of funds.

Finally, the search box function works seamlessly, allowing more informed investors to instantly access the ETF they are looking for.

 

 

Best INDEX PROVIDER website
WINNER: S&P Dow Jones

Finalist

Industry experts will tell advisers that to truly know and understand their ETF, they must have the same or a superior level of knowledge about the underlying index. To do that, the index provider can help in laying out clear, detailed and transparent—yet nonconfusing—information on its website.

In this case, S&P Dow Jones Indices clearly fits the bill. Its white and red colour scheme is attractively laid out on the home page, giving the sense of a vibrant and dynamic array of content, blogs and articles, as well as educational tools and resources.

Videos are part of the array of content that can educate and inform investors in an appealing and attention-grabbing way, and social media channels are used to engage its audience.

The website also provides easy to access information on their indices, with clear and concise links to each index's fact sheet and methodology.

Live data streaming and index performance is displayed in a banner across the top of the page, meaning that investors can measure the market, educate themselves on indices and shop around for ideas all on the same website.

Best FUNDS LAWYER
WINNER: Matheson

Finalist

Having an idea is one thing; setting up a fund and bringing it to market is quite another. ETF issuers are required to have a regulated investment management entity in their own country and nominate directors, choose a fund structure and have it all approved and registered by the domicile country central bank before listing the fund on a stock exchange. The whole process can take between eight to 12 weeks. Therefore, ETF issuers are looking for an efficient and experienced law firm. This is where Matheson comes in.

With a broad practice covering every corner of the Irish investing landscape, Matheson currently represents almost one-third (28%) of Irish domiciled funds by assets under management. The firm also represents more than 100 UCITS ETFs domiciled in the country.

There are 10 partners and 50 fee earners in the firm's asset management department, with associates in London and New York. This wealth of experience and knowledge—combined with a good taxation system, the full implementation of UCITS funds and all the regulatory aspects in place—makes Matheson a prime choice for ETF issuers.

Due to effective exchange agreements with the London Stock Exchange and extensive double taxation treaties, Ireland is likely to be the hub domicile for Europe-listed ETFs in the years to come, and Matheson is sure to be at the forefront.

 

 

Best ETF INVESTOR
WINNER: Nutmeg

Finalist

Into a world of clear black and white—direct platforms and fund advisory platforms—came Nutmeg, the UK's first online discretionary fund manager to create risk targeted model portfolios for end clients, populated with ETFs.

These clients can access the service for 1% per year in fees, and for a portfolio size as little as £1000. The service suits thousands of UK-based investors who do not require a full financial planning service, but also do not have enough time and knowledge to manage and execute their own portfolios.

It's not just ETFs—Nutmeg may use the odd active fund or tracker fund too—but this shows the open-minded nature of the firm and its willingness to strive for the best returns, depending on market conditions, the asset class in question and product availability.

There are no exit and entry fees, and no trading fees. It is also one of the few asset management firms to disclose its portfolio performance net of management costs.

And Nutmeg isn't short of friends, if it's short of direct competitors—asset management giant Schroders has provided financial backing, and the firm plans to double its staff count this year as well as double its user base to 80,000 people in 2015.

Best UK ADVISER PLATFORM FOR ETFs
WINNER: Ascentric

Finalist

Time and time again ETF.com hears advisers say: "I can't use ETFs on my platform," but not all advisory fund platforms follow the same mantra.

Ascentric has always been willing to take on passive funds since inception in 2007, and has more than £500 million in ETFs.

It is a clear example of how the investment management industry can move away from using clunky technology with the sole purpose of promoting expensive active funds for large initial investments and high levels of commission, to a sleek, efficient and nimble back office operation for managing clients' assets.

Ascentric was one of the first platforms to pioneer lower trading costs via model portfolio structures—going back as far as 2009 in partnership with asset manager Evercore Pan Asset, now Charles Stanley—and also offers cheaper, direct trading and execution due to its stockbroker capabilities and being a member of the London Stock Exchange.

It provides its adviser clients a fully integrated online viewing and dealing facility, allowing for an easy transfer of clients' assets onto a single platform and the ability to manage each client account in one place.

The platform also offers client independence, with a whole host of funds, securities and wrappers, including SIPPs, ISAs and offshore bonds.

 

 

METHODOLOGY

Finalist

ETF.com European Award winners are selected in a three-part process designed to leverage the insights and opinions of leaders throughout the ETF industry.

Step 1
The awards process began with an open nominations process, which ran from 1 December to 31 December, 2014. Interested parties, including issuers, index providers, advisers, institutional investors and ETF strategists, were invited to submit nominations. Self-nominations were accepted.

Step 2
Following the public nominations process, the ETF.com ETF Awards Nominating Committee—made up of senior members of the ETF.com Editorial and Analytics teams—voted to select up to five finalists in each category. Votes were cast on a majority basis, and ties were broken where possible with head-to-head runoff votes.

Members of the 2015 Nominating Committee:

  • Matt Hougan, President (Chair)
  • Rebecca Hampson, European Editor, ETF.com
  • Dennis Hudachek, ETF Specialist, ETF.com
  • Dave Nadig, Chief Investment Officer, ETF.com
  • Rachael Revesz, Senior Staff Writer, ETF.com
  • The nomination voting was completed by Jan. 7, 2015.

Step 3
Winners amongst these finalists were selected by a majority vote of the ETF.com ETF Awards Selection Committee, a group of independent ETF experts from throughout the ETF community. Committee members recused themselves from voting in any category in which they or their firms appeared as finalists. Ties were decided where possible with head-to-head runoff votes.

Members of the Selection Committee:

  • Jim Wiandt, Founder, ETF.com (Chair)
  • Jan Altmann, 4asset-managementz
  • Christos Costandinides, Consultant
  • Deborah Fuhr, ETFGI LLP
  • Allan Lane, Twenty20 Investments
  • Philipp Ochsner, Index Investor
  • Voting was completed by Jan. 21, 2015, but results were kept secret until they were announced at the ETF.com Awards Dinner.

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