Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Jose Garcia Zarate. He is Associate Director of Passive Strategies at Morningstar. Hello.
Jose Garcia Zarate: Hello.
Black: So, you've got some quite big news in the passive investment world, a possible merger of two providers. What's happening?
Zarate: Yes, Amundi and Lyxor have basically entered into exclusive talks whereby Amundi would buy Lyxor which currently is the second largest ETF provider in Europe and the combined mass of those two companies would consolidate Amundi's foothold in the ETF market.
Black: So, is this a surprise or were we expecting this?
Zarate: There had been indications over the past few months of a potential divesting by Société Générale, which is the parent company of Lyxor. So, it doesn't entirely come as a shock. Perhaps it's good to have final confirmation that this is actually going on rather than just relying on rumors.
Black: So, one thing we have to consider when fund groups merge is whether there's a lot of overlap in their products and that could result in mergers of funds or wind-ups of funds. Is that the case here?
Zarate: That would be highly likely scenario. Both Amundi and Lyxor are what you would class as generalist ETF providers, meaning that they want to offer all sorts of things to all sorts of clients and therefore, there would be quite a bit of overlap in terms of product lineup between the two.
Black: So, overall, do you see this merger as being a good thing for investors?
Zarate: That's perhaps debatable because, theoretically, you would think that the more the choice, the better for investors. But it is also true that at the top of the European ETF market and the way that the market is developing, there probably isn't much room for too many generalist providers. So, what we have at the moment is a group of companies, which as I said, want to sell everything to everybody and Amundi basically falls into that category. And then, you've got another group of providers which are more specialist houses which sell niche products.
Black: And obviously, you mentioned that this would strengthen Amundi's market share and market position. Is that a competition concern?
Zarate: Well, obviously, any merger will have to be approved by the regulators and I would think that in this case it would be mostly sort of like the French regulator because both are French companies and they have an important footprint in the French market. But things like these have happened in the past. So, it's not unusual. And at the moment, the expectation is that the merger will be completed.
Black: So, crucially, if I am an investor in any Amundi or Lyxor funds, what does it mean for me? Do I have to do anything?
Zarate: At the moment, no, because we are at the very, very early stages of what is the final negotiation. We obviously at Morningstar do rate quite a few ETFs from both Amundi and Lyxor and we will keep an eye on developments, particularly to see if there are changes that might affect the tracking ability of those ETFs, for example, what's going to happen with the portfolio management teams. But as I said, we are at the very early stages of this final negotiation. And so, for the moment, it's just a question of sit and wait for developments.
Black: Jose, thank you so much for your time. For Morningstar, I'm Holly Black.
