With the purchase of Commerzbank’s EMC business, the Group expands its Exchange Traded Funds offer for retail investors and pushes further into the German market.
Read the article in L’Agefi.
Nearly two years after acquiring Commerzbank’s Equity Markets and Commodities business, which includes both derivatives and investment solutions across asset classes, the deal is finally showing its benefits in the asset management business, while allowing Lyxor, the French bank’s asset managing subsidiary, to expand its passive management franchise. “The transaction was, in fact, rather complex,”, stated Arnaud Llinas, Head of Lyxor ETFs and indexing at Lyxor Asset Management, adding that “The transaction included not only the transfer of funds, but also Frankfurt’s management and sales teams, to a newly created entity, Lyxor Deutschland. The new set-up took nearly a year to finalize and was completed in November 2019”. The Commerzbank transaction also included the acquisition of CFS, a management company based in Luxemburg – though the set-up proved to be slightly easier.
The deal has added € 15 billion to Lyxor’s assets under management, of which € 9 billion from the ETF business and € 6 billion from active management. Total assets under management reached € 169 billion at end-2019, of which € 79 billion for the ETF business. “The acquisition helped us reinforce our position as a leader of the European ETF market”, said Arnaud Llinas. However, Lyxor’s ranking remains unchanged in third position in Europe in the ETF business, with a market share of 8.8% at end-2019 – with 1% added by the acquisition.
Lyxor plans to benefit from the significant German market specifics. In most countries, as in France, institutional investors dominate the market, “but the ETF market is more of a retail one in Germany”, explained Arnaud Llinas. According to him, the German market grew 25% annually in recent years, compared to a 15% increase for all other European ETF markets – retail and institutional. He added that “This outperformance should be long-lasting, as Germany has a strong investment culture.”
Commerzbank expertise should help boost Lyxor ETF sales to retail clients in France (i.e. 10% of total AUM at present, versus 50% generated by businesses purchased in Germany), as well as in Spain and Italy. Furthermore, “we plan to offer new ETF solutions such as mandates or funds of ETF, on which Commerzbank has a strong positioning”, stated Arnaud Llinas.
A range revamp
The range of products will be revamped. Half of the near hundred ETF funds acquired through the transaction are rather similar to the Lyxor range. These vehicles will be merged on the basis of size, with the smallest funds merged into the largest. “These funds have similar indexations and usually the same transaction fees. Nevertheless, we have committed to our clients that any adverse price effect will be limited to less than 5 basis points”, Arnaud Llinas added. Lyxor has already merged three of its ETFs, and further mergers are slated throughout 2020. Concurrently, Llinas mentioned that “a near fifty other funds complement our offer, such as the coverage of German small and midcaps.”
Lyxor will offer a wide range of nearly 250 index funds in Europe once this phase is completed. “This acquisition offers both synergy benefits in terms of costs, thanks to the economies of scale generated by the merger of funds, as well as enhanced revenues with the opening of new distribution channels in Germany”, based on Arnaud Llinas’ said. These are welcome advantages in the tough European asset management industry.