Asset Management Awards for Excellence 2017 – Best Fund Provider – ETF

iShares

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Without the help of collective globalisation or ‘easy’ monetary conditions, a new regime of compressed returns under riskier terms will exacerbate price scrutiny. A McKinsey estimate claims that, in a slow growth scenario, US and European equities could make 0.4-2.5% less in annual gains when compared with the past 30-year average, while for bonds in the same regions, annual gains could halt to zero compared with 1.6-1.7%.

Although Asian HNWIs may be moderating their multi-digit return expectations, investor knowledge is also on the up. Not only has this led to revised return targets but also heightened price and performance scrutiny of active managers.

The exchange-traded fund market’s storied rise, from US$600 billion to more than US$3.5 trillion in ten years, is in no small part due to such factors; and leading the pack is a behemoth among ETF providers: iShares.

iShares may be a provider of passive investments, but nothing about its business in Asia is passive. It registered US$1.5 billion worth of ETF inflows from Asia ex-Japan private banks up to October 2016 (+158% compared with the entire 2015), one-third of which came from new clients. Not settling for merely gaining critical mass, iShares continued to actively educate gatekeepers on the behaviour, usage, implementation and product universe of passive vehicles. Of the aforementioned US$1.5 billion, US$508 million flowed into fixed income ETFs, illustrating iShare’s efforts to encourage usage of a diversified shelf of ETFs.

The ongoing debate between active and passive investing may never subside. So long as new and effective ways to achieving alpha are brought to the broader investor base, markets will absorb such methods to (re)establish norms in best practices and new equilibriums in efficiency that should, in theory, translate into beta. At the forefront of the passive charge will be iShares which private banks in Asia near-unanimously selected as 2017’s Best Fund Provider – ETF.