In last week's feature we reviewed the top ten 2008 winners and losers by performance from amongst the European ETF universe, and also the top 10 funds by size and the ETFs with the biggest change in assets under management for the year.

This week we move on to review the businesses of the product providers themselves, highlighting the biggest gatherers of assets and those firms that have lost ground in the issuer league table.

It's worth reminding ourselves before we start that an average ETF issuer offering equity-only funds would have lost around 40% of its assets under management, even if no cash outflows had taken place, such were the declines in the markets in 2008. Therefore any firm that managed to keep asset levels stable over the year had significant investor subscriptions, and those that managed to gain funds were firing on all cylinders.

Without further ado, here is a table showing all European issuers with more than €100 million under management at end-2008. The table amalgamates providers of ETFs and of other exchange-traded products, such as ETCs—a liberty I have taken, despite the differing fundamental structure of the two types of investment instrument (ETFs are funds, and ETCs are debt securities). Figures are taken from the issuers themselves, except for the italicised/starred entries, where data were not available at the time of press, and I have used the end-November data from BGI's December "ETF Landscape" publication. As market movements were relatively quieter in December than earlier months, this shouldn't affect the final rankings too much, if at all.

*as at 30 November 2008

A Year Of Impressive Market Growth

Taking into account the savage bear market that hit equities in 2008, the estimated 20% growth (in euro terms) in the ETF assets of the providers listed in the table is an impressive achievement indeed. ETFs and other exchange-traded products stand out as one of the few bright spots in an otherwise unremittingly bleak year for the financial services industry.

If anything, the pace of flows into the ETF market seems to have accelerated towards the end of the year, as investors took flight from hedge funds, expensive structured products and actively-managed funds. Counterparty risk concerns have probably, on balance, also helped ETFs, although the failure of Lehman and the near-failures of Bear Stearns and AIG have caused investors, rightly, to examine ETF structures in great detail. So far the industry seems to be passing the test.

The Big Three Consolidate Their Position

The big three European ETF providers—iShares, Lyxor, and db x-trackers—consolidated their combined position, retaining a collective market share of just over three quarters (albeit thanks to a very strong performance by db x-trackers—more on this below). At the same time 2008 has seen the entrance of a number of ambitious competitors to the European ETF market—ETFLab, Comstage, CASAM with its relaunch, ETF Securities with their move into ETFs—all eager to take away some of the big three's business. And, of course, Goldman Sachs and Morgan Stanley are primed to enter the European market with their joint ETF venture "Source", albeit with a yet-to-be-determined product range. This will be an intriguing battle to watch, and one that should be good news for investors, as the new entrants are already undercutting established fee scales.

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