* ETF Opportunity Partners wants to acquire European ETFs
* Regulatory pressure increasing on European ETFs
* Some banks may want to leave business
Sept 27 Two former top executives from iShares,
the world's biggest exchange-traded fund manager, are looking
to buy out some of the ETF market's smaller players.
Lee Kranefuss, who headed iShares before it was bought by
BlackRock Inc (BLK.N) in 2009, and Rory Tobin, head of iShares'
international side until 2010, said they opened a new firm
called ETF Opportunity Partners with a plan to grow through
The firm is on the hunt mainly for European ETFs being run
by investment banks and others outside of the money management
business, Kranefuss said.
Regulators in Europe are looking to improve disclosures and
possibly curb sales of complex funds to retail investors. Even
the largest ETF sponsors there, such as iShares, Societe
Generale (SOGN.PA) unit Lyxor and Natixis (CNAT.PA) unit
Ossiam, are bracing for new regulations. Smaller players may
find the business no longer profitable. [ID:nL5E7KQ13W]
"In Europe, there's been an explosion of products from
firms that aren't fiduciary asset managers," Kranefuss said.
"Now there's a huge regulatory push on ETFs. We think there's
going to be consolidation."
The ETF began in the United States as a more-easily traded
form of an index mutual fund. Almost all U.S. ETFs directly own
a portfolio of stocks or bonds, but in Europe so-called
structured funds backed by derivatives contracts are more
The $300 billion European ETF market is also far more
fragmented than the $1 trillion U.S. market, where iShares,
State Street Corp (STT.N) and Vanguard Group oversee more than
80 percent of ETF assets.
Kranefuss said his new firm might have to alter how
acquired funds are managed, such as by switching to safer
derivatives contracts or moving to the U.S. model of owning
stocks and bonds directly.
"Our default will be that people ought to be holding what
the fund suggests it holds," he said.
(Reporting by Aaron Pressman, editing by Gerald E. McCormick)