HSBC And Vanguard Struggle To Make Impact In 2015

HSBC Global Asset Management has lost more than half a billion euros this year from its exchange traded fund (ETF) range, according to Deutsche Bank data, while Vanguard has lost top spot from 2014 to other major providers as investors switch out of U.S. equities.

The data as of 26 August 2015 shows that HSBC, which has 28 ETFs in its range, shed €577 million since 1 January. Most European ETF providers gained solid inflows over the same period.

A statement from an HSBC spokesperson read: "We've seen inflows in many parts of our passive and active business, but – along with our competitors – outflows in some of our ETFs where sell-offs in a number of markets have largely driven outflow volumes."

Commodities And Smart Beta Suffer

The only other ETF providers to have net redemptions so far this year were mainly commodity focused: Zuercher Kantonalbank (minus €140 million), Julius Baer (minus €117 million), and NCB Stockbrokers and Swedbank Robur, which shed €29 million and €23 million, respectively.

Smart beta specialist Ossiam also lost €73 million since 1 January, which comes at the same time as smart beta ETFs had net outflows in August, the first month to see net redemptions in a 12-month period.

Investors Ditch U.S. Equities

According to Morningstar data, HSBC was hit hardest by €442 million worth of outflows from three ETFs: HSBC USA ETF, HSBC S&P 500 ETF, and HSBC MSCI World ETF, which is largely made up of U.S. equities. The outflows prove a strong contrast to the last six months of 2014, when these three funds gained €533 million.

Investors have turned their attention to European equities instead. HSBC offers two European equity ETFs, which have a combined $343 million of assets, and two UK-focused equity ETFs.

Jose Garcia-Zarate, senior ETF analyst at Morningstar, questioned HSBC’s corporate strategy and said their product line-up seems to be “unbalanced”.

“HSBC launched several products in 2014 that weighted countries by economic footprint – and these were quite successful, but it seems to come in spurts,” he said.

The last ETF launch from the provider was in June 2014 – a global equity fund with costs of 0.25 percent. It has since grown to around $898 million under management and helped to bolster net sales in 2014.

Vanguard Loses Top Spot

Garcia-Zarate added that Vanguard, last year’s second top ETF seller at $5.5 billion this time last year, was struggling to match that of iShares and db X-trackers this year, as its flagship ETF – the S&P 500 ETF – has not seen the same popularity in 2015 as many investors see better return potential in other developed equity markets.

Vanguard has seen inflows of €2.4 billion YTD, compared to almost €18 billion at iShares, circa €7 billion at db X-trackers and around €5 billion at UBS.

Deborah Fuhr, managing partner of research house ETFGI, said Vanguard has 13 ETFs and there are certain disadvantages with having less products.

“Depending on where investors put their money, Vanguard is going to have some challenges similar to HSBC,” she said. “Do they have the building blocks that people are looking for? Are those products big enough to allow institutional investors to allocate what they want to allocate?”

A spokesperson at Vanguard said in a statement: "Growth is an outcome at Vanguard, not a goal. We are happy with the flows into our ETF range, as it indicates that investors are embracing Vanguard's low-cost philosophy. We will continue to take a thoughtful approach to building our business and expanding our product range, which will take time and patience."