In a deal first announced in April last year, Amundi acquired Lyxor from French investment bank Société Générale for €825 million, which included Lyxor Asset Management’s passive and active management activities for institutional clients globally, including ETFs and alternative products.

Amundi predicted that the acquisition of Lyxor would help drive the increase of its passive assets under management by 50% by 2025.

This was followed by a recent report from research and consultancy firm ETFGI which found that ETFs and ETPs listed in Europe achieved a new monthly record of $29.06 billion last month, overtaking the previous record of $27.17 billion achieved in December 2020.

According to ETFGI’s January European ETFs and ETPs industry landscape insights report, assets invested in the European ETFs industry dropped by 1.9% from $1.60 trillion at the end of December last year, to $1.57 trillion.

“The S&P 500 decreased by 5.17% in January. Developed markets excluding the US, experienced a loss of 5.33% in January. All countries in developed markets experienced losses, with New Zealand suffering the biggest loss of 14.35%,” said Deborah Fuhr, managing partner, founder and owner of ETFGI.

“Emerging markets decreased by 0.94% during January. Chile (up 12.44%) and Colombia (up 12.36%) gained the most, whilst Russia (down 8.74 %) and Poland (down 4.82%) witnessed the largest declines.”

By the end of January 2022, the European ETFs industry had 2,632 products, with 10,371 listens, asset of $1.57 trillion (the second highest on record), from 88 providers listed on 29 exchanges in 24 countries.

Net inflows of $24.94 billion were reported by equity ETFs/ETPs listed in Europe during January, an increase from $15.92 billion attracted in January 2021.

Fixed income ETFs/ETPs listed in Europe also saw an increase, with net inflows of $2.79 billion during January, an increase from $2.1 billion reported in the same period in 2021.

However, commodity ETFs/ETPs saw a decrease, reporting $1.54 billion in net inflows, lower than the $2.36 billion in net inflows commodities products had gathered in the same time period in 2021.

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The asset manager confirmed it was in talks to purchase Lyxor from  Societe Generale for €825 million in April last year. The deal is expected to close in February.

The firm has predicted that upon completion the addition of Lyxor’s extensive passive and active management strategies for institutional clients globally, in particular in ETFs and alternatives, would help to drive significant growth, with the ETF segment complementing the active business, resulting in around €170 billion assets under management across about 300 products

Amundi said it expected to see a 50% growth of passive assets under management by 2025, with the combined entities passive businesses generating a 14% market share for Amundi. It still has a way to go till it challenges BlackRock though, which held around 50% of the European ETF market at 2020 estimates.

However, Amundi’s anticipated growth in passive income should complement its acceleration of its active liquid alternatives business, where it also expects increased used of its alternative UCITS platform by 50% by 2025.

In light of this, the firm has launched a new dedicated business line for liquid alternatives named Amundi Alternatives, combining Lyxor’s 23-year legacy in this space and Amundi’s distribution network, in anticipation of the deal.

“The Lyxor acquisition is another important step in the deployment of Amundi’s strategy. It elevates Amundi to the 1st position of European ETF providers and enriches our active management offering with a leading position in liquid alternative assets,” said Valérie Baudson, chief executive of Amundi.

“The key managers of these two businesses have been appointed. Amundi is fully prepared to be the reference partner on these areas of expertise for both retail and institutional clients in Europe and in Asia, and thus to pursue its growth in two promising markets.”

With all this expansion on the horizon, the firm might soon be on a hiring spree – its head of UK ETF sales, Samit Patel, departed last November while it also lost Robin Kooijman to HANetf earlier in the year.

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Increased activity from retail investors and smaller liquidity providers in 2020 has led to a significant portion of ETF trading volumes returning to on-exchange.

Speaking during an ETF trading virtual discussion at TradeTech, head of ETFs at Euronext, Brieuc Louchard, said that on-exchange ETF trading volumes had increased 40% year-on-year at the pan-European exchange operator.

He attributed the increase to a larger number of smaller liquidity providers trading on exchange, offering additional liquidity and encouraging other participants to follow suit.

“We saw more smaller liquidity providers coming onto the market and offering extra liquidity and subsequently some banks that left the ETF market a while ago in Europe are now also coming back. 2020 was a year of maturity for the European ETF market,” he said.

“I think we are getting closer to the US market structure. For me, 2020 was the year of retail access of ETFs on Euronext. Some say it was a short term trend due to COVID-19 but we are now talking in 2021 and the figures are still there in terms of retail participation.”

ETF volumes relating retail investors taking place on the Euronext exchange had almost doubled in 2020 to 15%, in comparison with 8% in 2019, Louchard added, and institutional investors are reportedly following.

“It’s a virtuous cycle. The more liquidity on-screen, the more people will be willing to trade on-screen. The trend is increasing for retail and we are also starting to see some institutional flow going back to the exchange compared with request for quote (RFQ),” said Louchard. 

When asked about his use of off-exchange trading mechanisms, head of Lyxor Asset Management’s dealing desk, Cyrille Combes, said his desk had continued to use RFQ platforms and other similar tools due to the size of their trades. He agreed, however, that retail investment was pushing ETF volumes back onto exchanges. 

“The trend I think will be step by step a virtual cycle with more and more retail investors coming in. Most of the retail investors are reading the liquidity on exchange data and not on MTF platforms so it’s good to give the real liquidity, kind of like the US market,” said Combes.

Euronext’s Louchard also claimed that an increasing number of market participants were deploying low touch equity algos adapted to the ETF model, including fair value peg orders, in their ETF trading activity.

“Some banks and brokers are starting to offer such execution capacity to the buy-side community. We welcome such initiatives because it brings an equities style of execution to the ETFs, which is a kind of back to basic trend. This is the best way to bring back the (exchange) E and the (traded) T of the ETF,” said Louchard.

The number of retail investors active in the market has surged during the pandemic, with retail broker Interactive Brokers, reporting that it had seen almost 40,000 new accounts during the peak of market volatility in March last year.

Institutional investors have become increasingly concerned with this surge, so much so that several institutions have launched protective initiatives designed to help clients navigate the shifting landscape.

In March earlier this year, broker-dealer Cowen launched an algorithmic trading tool named Inaccessible Liquidity Adjustment that offers clients the option to adjust their trading for liquidity deemed inaccessible, often due to retail trading activity.

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French investment bank Societe Generale has entered into exclusive talks with Amundi to sell its Lyxor Asset Management business for €825 million as part of an ongoing cost savings strategy.

The deal is expected to be completed by February 2022 and includes Lyxor Asset Management’s passive and active management activities for institutional clients in France and globally, including exchange traded funds (ETFs) and alternative products.

Upon completion, Amundi will become a leading European ETFs group with a combined €142 billion in assets under management and 14% market share. It marks the final major deal for Amundi’s outgoing chief executive officer, Yves Perrier, who is preparing to step down after 10 years.

“The acquisition of Lyxor will accelerate the development of Amundi, as it will reinforce our expertise, namely in ETF and alternative asset management, and allows us to welcome highly recognized teams of people,” Perrier commented. “Finally, by creating in France the European leader in passive asset management, it will contribute to the post-Brexit positioning of the Paris financial centre.” 

For Societe Generale, the transaction will conclude the bank’s refocusing programme, which was launched in 2018. The institution has made sweeping cuts to its investment banking division in a bid to reduce costs by roughly €500 million. 

Societe Generale will create a wealth and investment solutions department to cover the scope of the activities not part of the transaction that will be staffed by Lyxor teams also not included in the deal.

This new division includes structured asset management solutions for global clients and structure savings, asset management and investment solutions for its private and retail banking networks, said Societe Generale.

“It is fully in line with Societe Generale’s strategy in terms of savings products, which is to operate in open architecture and team up with the best asset management experts to build the most suitable offers for our clients,” Frédéric Oudéa, chief executive officer of Societe Generale, commented on the deal.

“Societe Generale and Amundi will remain key partners, each participating mutually in the value proposition implemented for their clients. In addition, this transaction would successfully close the refocusing program launched in 2018 by Societe Generale.”

In November, Societe Generale confirmed its plans to cut more than 600 jobs in France under plans to restructure its credit and equity derivatives structured business. The bank also saw a near-collapse in its equities revenues in the first quarter of 2020, linked to a €200 million loss on structured products due to cancelled dividend payments. 

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Societe Generale subsidiary Lyxor Asset Management has integrated a cloud-based execution management system (EMS) from trading systems provider FlexTrade.

Named FlexNOW EMS, the system combines cloud, desktop, mobile, and API technology to better streamline operations. The system will help the French asset manager better navigate challenges posed by recent changes to working conditions during the pandemic, FlexTrade said. 

“Integrating a new EMS in our complex workflow is never easy but with FlexNOW we have replaced our old solutions and greatly improved the efficiency and operational safety of our workflows, especially when working with larger baskets,” said Samy Debbah, head of the dealing desk at Lyxor Intermediation.

“The team’s ability to quickly respond to feedback has been impressive, continually improving the platform to meet our needs. FlexNOW has worked seamlessly both in the office and when working remotely, an absolute must during these times.”

FlexTrade added its system gives users the ability to trade several thousand stocks and futures across brokers and algos in seconds.

“The adaptability underpinning FlexTrade’s approach to implementation has allowed us to deliver a trading system tailored to Lyxor’s vision, which will continue to help optimise the efficiency of the trading process in the future,” said Manuela Bauer, EMEA sales director at FlexTrade.

The integration by Lyxor Asset Management comes as part of a series of new business deals for FlexTrade recently. Last month, Chinese brokerage Tianfeng Securities International deployed the order management system from FlexTrade, known as FlexOMS.

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