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COPENHAGEN (Reuters) - BlackRock Inc (BLK.N), the world's largest money manager, predicts that Nordic countries will lead the way as investment in exchange-traded funds (ETFs) achieves unstoppable growth over the next few years.
ETFs are a relatively new instrument in the Nordics and will benefit from rising investor demand for multi-asset products, which will help to drive strong double-digit growth throughout Europe, BlackRock's head of institutional business in Europe and head of Nordics said on Tuesday.
"The general growth in Europe will be of 20 to 30 percent per year in the next three to five years, and that growth is unstoppable," Peter Beske Nielsen said at the Reuters Nordic Investment Summit.
"In the Nordics, I believe we will even see stronger growth as we are coming from a lower starting point and have some catch-up to do. Growth could be around 40 percent in the next few years."
The $220 billion European ETF market lags a long way behind the $1.5 trillion in the United States, though BlackRock believes that there is the potential to hit $1 trillion as the market matures over the next three to five years.
BlackRock had nearly $3.9 trillion in assets under management at the end of June and is the largest U.S. provider of ETFs through its iShares subsidiary, which it bought from Barclays in 2009 and now manages $815 billion of assets.
The iShares business controls about 39 percent of a global ETF market that BlackRock believes has the potential to grow to $5 trillion.
BlackRock's optimism for Europe is not limited to ETFs, however. About two months ago it said that companies that make their money in Europe should outperform globally-focused stocks in the coming months. It is particularly upbeat on prospects for the car, airline, retail and construction sectors.
"I think European shares are approaching fair value, but they have emerged from a low starting point. I think there is still a little way to go," Nielsen said.
However, market volatility remains a concern for BlackRock's clients, Nielsen added. With uncertainty still lurking in many parts of Europe and in the United States, he said that the Nordic countries are still viewed as a safe haven for corporate bond investors.
"Investors start to focus on corporate bonds, and there are some healthy companies in the Nordics," he said.
Nielsen added that navigation of tightening global regulation in the wake of the financial crisis presents a major challenge for BlackRock, though he thinks that the proposed financial transaction tax will not be passed in its present form.
"There may be a much milder version," he said, adding that he expects to see a new proposal soon. Follow Reuters Summits on Twitter @Reuters_Summits
Editing by David Goodman