I had the opportunity to meet with Bryon Lake, Head of Invesco PowerShares ETFs EMEA for Invesco PowerShares in London. Our great thanks to Kevin Connolly and Ingrid Erickson for their continued, excellent support and for arranging this meeting. Bryon was one of the early employees at PowerShares, and he worked closely with Ben Fulton, Geoff Eliason, Jonathan Wills, and Ranga Nathan (Bryon and this group are some of the real pioneers in the ETF industry).
I was able to meet and talk with several members of the PowerShare’s team, including distribution, support, product development, and trading. I gained valuable insights talking with Bryon and his team. After spending time with Bryon, it was easy to see that the “PowerShares culture” is alive and well in London. These are my own observations:
The U.S. and European ETF markets have distinct differences. While the U.S. ETF market is roughly split 50% institutional and 50% retail, the European market is skewed 80% institutional (it is worth noting that the definitions of institutional do not line up as neatly as you would find in the U.S.). It seems that there is real traction for ETF usage from European asset managers and fund of funds. There is not a strong RIA community in Europe, so it becomes important to understand the “incentive and infrastructure” associated with asset management in Europe.
My perception from our discussions is that Europe and the U.K. are more inclined to use “active” investment solutions, and less inclined to use “passive strategies.” It seems that there is great opportunity for assets to move from active strategies to into ETFs, particularly smart beta ETFs.
PowerShares has been synonymous with Smart Beta strategies since its founding. They are clearly well positioned to capture the Smart Beta wave globally. As a side note, a strong trend towards smart beta has come up in several meetings the past few weeks with stock exchanges and industry professionals. The concept was featured prominently in our meetings in Tokyo, Beijing, Paris, and London.
My meeting also highlighted some of the challenges for managing money in Europe. Nearly all of the trading is done on the OTC market, so there is more liquidity available than most people perceive (MiFID II could help in providing more transparency, but it is years out…). It is clearly a challenge to list and trade in multiple locations across Europe, using multiple currencies. These are logistical hurdles that we do not consider in the U.S.
These challenges make London an ideal location—a global, independent market that is part of the European Union. I came away highly impressed with Bryon’s leadership and vision—there are great opportunities ahead for the ETF market in the U.K. and in Europe.
Special thanks to Brennan Staheli, Daniel Doxey, and the Lunt Capital team for their contributions to this report.