UBS will de-list its Australian exchange-traded funds (ETFs) in a strategic retreat from the burgeoning market, as $2 billion was wiped from the industry’s funds under management in February.
The Swiss banking giant has applied to the Australian Securities Exchange to have the trading status of its nine locally listed funds revoked. The total business unit has $442.2 million in assets under management, according to UBS data.
It intends to convert three of the funds – the UBS IQ MSCI World ex Australia Ethical ETF, UBS IQ MSCI Asia APEX 50 Ethical ETF and UBS IQ MSCI Australia Ethical ETF – into unlisted managed funds and keep hold of existing investors.
Investors would need to approve the conversion of the ETFs via an election process ending on April 29, with a minimum balance of $10 million for the plan to be viable.
As a sweetener, UBS will cut investor-facing fees on the three new unlisted funds by between seven and 20 basis points.
The remaining six ETFs offered by UBS in Australia, including two Australian equities funds that track Morningstar indices and a number of global equities funds relying on MSCI indices, will be closed.
A Morningstar spokeswoman said the global research house “supported the decision” to close down the funds, which bore the Morningstar brand alongside that of UBS.
Its Australian cash ETF will also be shuttered, despite record volumes into similar listed fixed income products experienced by competitors including BlackRock and BetaShares in the past week. The UBS cash ETF is understood to have had just $1.5 million under management.
Notwithstanding the record flows into some ETFs, the Australian ETF industry as a whole lost $2 billion in funds under management in February as markets began to react to the COVID-19 crisis, according to BetaShares.
But UBS sources said the closure of the funds had been in the works for some time and was not related to the current market downturn. The provision of low-cost, passive ETFs was ill-suited to UBS’ core target market in Australia of high-net-worth investors, they said.
Bryce Doherty, head of Australia and New Zealand for UBS Asset Management, told the ASX that lack of investor demand was the catalyst for the de-listing.
“In respect of each fund, UBS considers that the fund is not, and is not likely to become, viable as an ASX-quoted [ETF],” he said. “This is primarily due to insufficient scale, leading to costs that are disproportionately high as a percentage of net asset value of each fund.”
In a statement to The Australian Financial Review, Mr Doherty said the business would return to its core investing strengths.
“Strategically we have decided to focus on our successful domestic and global passive business, where we manage $23 billion in institutional mandates in Australia, along with $500 billion in index assets managed globally,” he said.
“We continue to listen to our clients, the capabilities they want us to deliver and the way these capabilities should be packaged. This includes active and passive capabilities.”
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‘Not a surprise’
UBS’ Australian passive investment push commenced in 2012.
Chris Brycki, a former UBS portfolio manager and founder of robo-adviser Stockspot, said the withdrawal from the market would not come as a shock.
“UBS pulling out of ETFs is not a surprise to us, as none of their ETFs got much traction and this wasn’t a core part of the business,” he told the Financial Review.
“None of our clients will be impacted as we haven’t recommended any of these funds.”
Aleks Vickovich is the Wealth editor. He writes about financial advice, superannuation, investment and regulation from the Financial Review’s Sydney newsroom. Connect with Aleks on Twitter. Email Aleks at email@example.com