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Blackrock – Testing the Limits of ETF Dominance

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Blackrock’s march toward European ETF dominance continues with this month’s announcement that the group has formally acquired all 58 of Credit Suisse’s exchange traded funds. The 58 funds will be rebranded as iShares ETFs; ISIN codes and identifiers such as Bloomberg tickers will remain unchanged.

Credit Suisse had originally said that it was selling off its ETF business as part of its push to expand its capital base, so as to meet tighter regulatory requirements. But the acquisition marks a particularly important transition for iShares, which has been in the Swiss ETF market since 2003, and which now looks set to trump all comers for size.

Blackrock says that the deal means it now provides the broadest range of ETF exposures domiciled in Switzerland. As at the end of May 2013, it says, the Swiss group’s range of Swiss-domiciled products had assets of CHF 7.7 billion ($8.1 billion) across equities, fixed income and gold funds. But, including domiciles in Luxembourg and Dublin, the total was reported to be closer to $17.6 billion. The great majority of Credit Suisse’s funds are physically backed.

Rivalry from State Street

That’s the good news, but it hasn’t been achieved without incident. The Credit Suisse deal was originally laid out at the start of this year, but it hit an obstacle in May when the Office of Fair Trading declared an inquiry into the competitive aspects of the deal.

Specifically, there had been concerns that the acquisition might leave BlackRock controlling 75% of the total assets in the European physical ETF market. But, after extensive researches, the OFT announced on 13th June that it was clearing the deal for take-off.

The decision might still leave a sour taste at State Street Global Advisors, which had also put up an early bid for the funds. The difference being that State Street had only about 1% of the $309 billion European market whereas Blackrock, with around $150 billion, already accounted for nearly half the market.

On this occasion, then, the defending champion won. Will it be the same story next time?

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