The ETF market is experiencing a moment of great euphoria. The year opened with record numbers that improve the excellent results scored in 2017….…
Olivier Paquier, Head of Continental Europe ETF Distribution – J.P. Morgan Asset Management
28 May 2018 ETFWorld – All rights reserved
ETFWorld: Which issues do you think will be most important for investors this year and why?
Olivier Paquier: The macro environment is not easy to navigate and in the coming months investors will have to find ways to diversify and protect their portfolio from market volatility. In that context, alternative ETFs can be a nice addition to the palette of products available in the market, focusing on the liquidity aspects offered by the ETF wrapper.
ETFWorld: From the point of view of the product, we have seen several themes developing over the years, all the way up to Smart Beta ETFs. Do you think that new themes will be introduced or will there simply be a fine-tuning of the existing ones, and if so, why?
Olivier Paquier:Fixed income is one to watch. Fixed income ETFs, either passive, smart beta or active, are still in their infancy. The offer is rapidly growing and we think they will play an important role in the growth of the ETF market overall. Fixed income AUM has grown at a rapid rate of over 26% over the last five years. We think this will continue, or even accelerate, over the next five to ten years.
ETFWorld: The estimates suggest that the ETF market is expected to double in size in the next five years. Five years from now, where do you see your positioning, and what measures will you take to maintain a level of growth greater than or equal to the market’s level of growth?
Olivier Paquier: It’s our intention to build a strong ETF business which leverages the best of our active, smart beta and plain vanilla capabilities to serve different client needs over the next three to five years. More generally, it is important to bear in mind that ETFs do not equal passive investments only.
ETFWorld: Whilst the arrival of new issuers and the continuous listing of new ETFs may, on the one hand, express the effervescence of the market, on the other hand, they could risk complicating the choice of instruments to invest in. What you are doing or will you do to help institutional investors in their choices?
Olivier Paquier: Sophisticated investors across Europe are saying they want to see innovation across a range of asset classes, although demand for greater innovation in fixed income is particularly noteworthy at this time, whether that be passive, smart beta and/or active capabilities. We’ve observed that European investors are on the lookout for proven strategies that can provide diversification benefits in their portfolios.
ETFWorld: MiFID II is the hot topic of 2018. Do you think this will be the real turning point for the market and how do you plan to move to seize the new opportunities that will open up?
Olivier Paquier: Net-net we think MIFID II is very positive for the ETF industry. Greater transparency is a driving force behind these regulations and transparency is one of the defining characteristic of ETFs. We believe MIFID II will help driving a better understanding of the liquidity and volumes processes across European listings. The cost aspects embedded in wrapped solutions with full disclosure will also benefit clients using ETFs.