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

by Emma Dunkley on Jan 10, 2013 at 10:27

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

BlackRock’s Joe Linhares, head of iShares EMEA, talks about the strategic importance of buying Credit Suisse’s $17.6 billion exchange traded fund (ETF) arm, as part of its plans to conquer Europe.

Speaking to Wealth Manager, Linhares explained how the deal provides the most efficient way for iShares to enter the Swiss market, in which Credit Suisse has historically had a stronghold.

‘In Switzerland we have had zero market share in the local Swiss ETF market,’ said Linhares. ‘This is an opportunity to enter Switzerland and acquire a product range – this market is important strategically for BlackRock.’

The asset management behemoth, which has blazed the acquisition trail over the last few years, has ambitious expansion plans for the European ETF market, which Linhares says is still at the early stages of growth versus its older US counterpart.

The European ETF market, which is estimated to be around 3% of the whole Ucits funds industry in the region, is also set to benefit from the changing regulatory environment, which is seeing commission phased out in the Netherlands, the UK and potentially other countries in the continent.

‘Another important element to think about,’ said Linhares, ‘is what’s happening in the retail and wealth market across Europe. Demand for these products is rising, while retrocessions are coming down. We think this is a massive opportunity over the next 10 years.’

He added: ‘We see the possibility of doubling our business in the next three years.’

While the acquisition of Credit Suisse, which is arguably of greater strategic importance than of economic or financial benefit, is the latest move for the asset manager, it has many other strategic partnerships on the go, or in the pipeline.

Linhares said iShares worked last year with an Italian Private Bank as part of a move to distribute ETFs and is currently working with multiple entities across Europe to deliver its ETFs to a wider client base, via a range of channels such as funds of ETFs.

Making strategic partnerships and gaining a local presence in the diverse markets constituting Europe is the route to tapping the growth potential in the continent. ‘The amount of retail flow in the US will play out in other parts of the world,’ said Linhares. ‘Europe will be the next to drop.’

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