Goldman Sachs Brings Its American ETF Battle Plan to Europe

September 26, 2019

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Bloomberg – Goldman Sachs Group Inc.’s asset management unit is making its first foray into the exchange-traded fund market in Europe with a low-fee offering that takes a page out of its U.S. playbook.

The ActiveBeta U.S. Large Cap Equity fund listed in London today, a carbon copy of its mega-successful factor fund, GSLC, which kick-started Goldman’s ETF business across the Atlantic. At $6.8 billion, it remains the firm’s largest by assets.

Like its American sibling, the fund is setting a new low for fees charged by multi-factor ETFs, which offer investors exposure to stocks with several characteristics like value and momentum.

The new fund’s 14 basis-point expense ratio is offering a discount to the fee charged by JPMorgan’s multi-factor equity ETF, which launched in July and has a 19 basis-point expense ratio. GSAM’s U.S.-traded equivalent is priced at just nine basis points.

Goldman Sachs Asset Management is playing catch-up with JPMorgan Chase Co., which has a two-year head start.

“We’re going to take a similar approach to our U.S. line-up but focus on the needs of European investors,” Mike Crinieri, global head of ETF Strategy at GSAM, said by phone. The firm is focused on the multi-factor approach because that “adds value over the entire market cycle” and it will continue expanding its European business for different asset classes, he said.

Multi-factor ETFs are part of the smart-beta boom that now oversees more than $926 billion in the U.S. Bloomberg Intelligence analysts are optimistic about the growth prospects of the sector as more financial advisers seek innovative products. That’s particularly the case in Europe where the ETF market is still less than a quarter the size of America.

“It’s far from a mature market — we’re still looking at double-digit growth,” Peter Thompson, head of GSAM’s European ETF Business, said by phone.

In addition to the London Stock Exchange, the new ETF will be listed on the Deutsche Boerse, Borsa Italiana and the Swiss Exchange over the next three to eight weeks, said Thompson. GSAM hopes to introduce about 10 new products across both fixed income and equities across these exchanges and in London by the end of the first quarter of 2020, he said.

“Goldman’s targeted lineup and reputation drew flows quickly in the U.S., and we expect the same in Europe,” wrote Bloomberg Intelligence analysts Athanasios Psarofagis and Eric Balchunas in a note.

Goldman, with over $14 billion in ETF assets, has 19 such funds in America with the first launched September 2015.

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