Structured Products Europe Awards 2016
Inflows into exchange-traded funds (ETFs) of all stripes continues to balloon in Europe, driven in large part by the derisory rates of return available from the active fund management industry. Few houses have capitalised more intelligently on the demand than UBS.
Over the past couple of years, the bank has augmented its client base both by developing fresh products and extending its offering into new regions. UBS has increased the number of ETFs on which it makes screen prices on four European exchanges from 300 to more than 400 in the past 18 months. The bank is also a key participant on numerous request-for-quote platforms across the continent and claims a hit ratio in excess of 20%.
The ETF space may be crowded but UBS seeks to stand apart through its client advice and support services. It has also had notable success in recruiting new clients in Scandinavia and Asia, says David Stringer, the bank's London-based co-head of global equity finance distribution for Europe, the Middle East and Africa (Emea).
"The strength of our advisory business is a key differentiator for us. This is recognised by our clients," he says. UBS offers a full, bespoke advisory service that includes index analysis, product selection, beta pricing and flow analysis. Granular analysis and advice is tailored to the most demanding and specific of needs.
Client advice is based on the UBS Beta Selector product, which provides an entirely customised analysis of more than 5,000 listed products, based on an investor's specified benchmark. The product then suggests the most appropriate investment solutions for the client. Exchange-traded products, futures and over-the-counter swaps can all be considered in the analysis.
UBS also has a deeper client franchise than many other ETF brokers. This is incredibly helpful to the ETF business as it means flows can be offset more easily and clients can be offered better pricing as a result. For example, the bank's success in attracting interest in its commodity ETFs is due in no small part to its in-house commodity business.
"The strength of UBS's programme trading and algorithmic trading platforms are key components in our offering, giving us an enhanced ability to trade the underlying," explains Stringer.
The bank has undergone a significant shift of strategic direction in recent years, placing a renewed emphasis on its pre-eminent wealth management business. Stringer says these radical changes to its business model stands it in good stead when compared to other institutions, which are only now facing the tough and painful decisions UBS made several years ago.
"UBS refined its operating model some time ago, and consequently we have a relatively stable and extremely compliant business," says Stringer.
The past few months of European political turmoil have provided several opportunities for the bank to demonstrate its expertise in client advice and analysis. In the month leading up to the UK's referendum on membership of the European Union, for instance, UBS was approached by a client wishing to transition a very large position from the MSCI Europe Index to the MSCI UK Index. Working in tandem with its in-house quant and algo teams, the bank was able to propose a strategy that limited market impact while producing a significant cost saving compared to the client's original plan.
It is this kind of all-arms analysis, utilising several different branches of what it still a large and versatile financial services institution, that gives UBS a competitive advantage over its rivals in the ETF space.
The week on Risk.net, December 2–8, 2017Receive this by email