Why Robinhood investors have an outsized impact on the market
Retail investors riding cannabis and video games are loosening the stranglehold of institutions on Europe’s US$1 trillion exchange-traded fund market.
In a tell-tale sign of rising retail activity, exchange trading volumes of so-called thematic ETFs have more than doubled this year from the same period in 2019, according to Bloomberg Intelligence. About 9.4 billion euros (US$10.8 billion) of the equity products, which track investing themes like marijuana, robotics and AI, have been bought and sold.
Any sign of increased engagement by smaller investors will surely be welcome in Europe, which has struggled for years to develop a retail customer base. Morningstar estimates that more than 80 per cent of ETF assets in the region are in the hands of institutions like private banks, hedge funds and pension funds, who typically trade over-the-counter.
“Because retail is still a pretty small part of the market there’s a push by issuers to capture that,” said Athanasios Psarofagis, a Bloomberg Intelligence analyst.
The situation is in stark contrast to the U.S., where moms and pops have been instrumental in growing the world’s biggest pool of ETF assets.
Funds tracking companies that benefit from work-from-home policies have won over investors this year, according to Psarofagis. Among the most popular products in Europe are the VanEck Vectors Video Gaming and eSports fund (ESPO LN), which has around US$450 million, and the First Trust Cloud Computing ETF (FSKY LN), with US$340 million.
The Bloomberg Intelligence data is in line with that from brokerage houses in Germany, the U.K., France and Denmark, who report a surge in mom-and-pop trading since the COVID-19 selloff, akin to the Robinhood phenomenon in the U.S.