Why exactly has BlackRock bought Credit Suisse's ETF business?

Consolidation, staff cuts and Dan Draper

The transaction with Credit Suisse is not expected to complete until the second quarter, but it is possible there will be a level of consolidation on the cards across the fund ranges, as well as potential staff cuts.

There is speculation over Dan Draper’s role, although he is believed to have been on the plane on his way to Zurich and is still part of the process of fleshing out how the merged entities will work, Wealth Manager understands.

Draper, who is global head of ETFs at Credit Suisse, previously worked at iShares before moving over to Lyxor Asset Management in 2007 for three years. It will only become clear as to his role over the coming months as the transaction completes.

Last year, Linhares explained in a comment for Wealth Manager how there is more consolidation down the line, with many of those ‘me-too’ products with a small amount in assets under management closing or being merged.

‘We think consolidation is inevitable and we are proponents of it. We have a fractured industry with more than 40 providers, which means liquidity is fragmented,’ Linhares said at the time. ‘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.’

The deal will see iShares control nearly three-quarters of assets in the European physical ETF space. Upon completion, the expanded iShares EMEA ETF range will comprise 264 ETFs with $157.6 billion in assets under management, according to ETFGI.

The consultancy firm headed by Deborah Fuhr said last year that if iShares bought Credit Suisse’s ETF arm, its market share would rise from 64.4% to 73.1%. Such dominance dwarfs other providers in Europe, beating off competition from other physical issuers, particularly new entrant Vanguard and State Street Global Advisors.