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How dominant would BlackRock be if it bought Credit Suisse ETF arm?

by Emma Dunkley on Oct 25, 2012 at 13:13

How dominant would BlackRock be if it bought Credit Suisse ETF arm?

BlackRock’s iShares would control nearly three-quarters of assets in the European physical ETF market place if it bought Credit Suisse ’s $17 billion ETF business, according to ETFGI.

Late last week it emerged that Credit Suisse’s European ETF business was up for sale, with BlackRock and State Street Global Advisors (SSgA) the two firms named in the bidding process, according to Reuters.

iShares already dominates market share in Europe with $125 billion in assets under management, accounting for 64.4% of all assets in physically-backed ETFs, ETFGI said.

Credit Suisse Asset Management follows, along with Zurich Cantonal Bank, with 8.7% each, and then UBS Global Asset Management, with 4.65%.

If iShares were to buy Credit Suisse’s ETF arm, its market share would rise from 64.4% to 73.1%.

Alternatively, if SSgA were to buy Credit Suisse’s business, SPDR’s market share of the physical market space would rise from 1.6% to 10.3%, taking it far beyond HSBC, which has a market share of 1.2%.

BlackRock is deemed to have the edge over SSgA, Citigroup analysts said, according to Bloomberg. The report from the investment bank noted BlackRock has a past of acquiring smaller asset managers and has greater financial flexibility, while State Street focuses more on returning capital to shareholders.

In a comment for Wealth Manager last month, BlackRock’s Joe Linhares, European head of iShares, said consolidation is ‘inevitable’ and that the firm is a proponent of it, as consolidation will lead to a greater pool of liquidity.

He said at the time: ‘We have a fractured industry with more than 40 providers, which means liquidity is fragmented. We think consolidation is good for investors over time, because it will lead to greater liquidity and more focus on a handful of fund groups. 

‘Although choice and competition is positive, do we really need 42 different providers? No, we need a handful of strong providers.’
 

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