A holistic approach brings big results for Citi
Being the ETF sell-side platform of choice is the goal of Citi, winner of this year’s ETF Express European award for Best ETF Research Provider.
Andrew Jamieson, global head of ETF product at Citi, explains that key to their differentiated approach is the fact Citi is neither an ETF issuer nor an ETF Investor. “We offer a broad spectrum of ETF services to our issuer and investor clients, but without conflicts of interest. By approaching our clients’ needs holistically, we can help both new and established issuers navigate their own ETF journey on an agnostic basis.”
In addition to offering award-winning dedicated ETF research and content in each of the major regions, spanning both equities and fixed income, Citi is a leading trading house, investing heavily in building out its technology, particularly in Europe, where it has rapidly climbed up the rankings. In fact, Citi narrowly missed being named “Best Institutional ETF Broker” this year, a testament to its progress. Furthermore, Citi is developing its on-screen market-making capabilities, and has added both BlackRock and DWS to its swap provider roster. In parallel, it has played a leading role in supporting the borrowing, lending and collateral acceptability of ETFs in both its prime services and fixed income repo businesses.
Perhaps Citi’s greatest breakthrough in 2020 has been onboarding its first client onto its European ETF custody and fund administration offering, part of a global offering that spans the Americas to Asia, including Australia.
“In Europe we are the largest common depositary or paying agent for the ICSD model, with 85 per cent of the market share,” Jamieson says. “And therefore, to land our first fully fledged ETF custody client in Europe is the last piece of the puzzle, and unlike our traditional ETF custody competitors, we are the only one that offers this holistic end-to-end enterprise-wide solution across Markets and Securities Services.”
He also comments that the economies of scale of dealing with a big bank like Citi offer a compelling opportunity for investors and issuers alike.
“We have taken a deliberate strategy not to launch ETFs, as we are not an asset manager,” he says. “Being the sell-side platform of choice is something that we have been committed to for the last three and a half years, since we have started this ETF initiative, something that has gone from a vision to a project, to a fully-fledged business.”
Jamieson believes that what Citi has done is unique in that they have created a ‘virtual’ business that breaks down the traditional investment bank silos. As an example, traditionally, ETF trading sat within the Delta 1 trading desk, and traded ETFs as a homogenous product (or ticker), not differentiated by its underlying asset classes.
“There has been a lack of connectivity to the product itself,” he says. “We have broken it out into its asset class specialisations, so we have an equity trading hub, a fixed income hub and a commodities hub. Tapping into the underlying expertise in each asset class allows greater primary participation, taps into house inventory which then ties in a much stronger distribution angle.”
Jamieson believes this approach has incentivised a new army of sales people who were never incentivised to sell ETFs in the past.
Citi’s client base is largely institutional investors and over 2020 the bank saw significant volumes. “We saw portfolio rotation and realignment in the immediate Covid-aftermath, generating a huge uptake in interest in ESG and reinvestment into ESG equivalent products,” he says. He also believes that fixed income ETFs have proved their worth over 2020 and are now fully embedded in the Fixed Income invertors’ toolkit.
“We are fully committed to ETFs, and are growing with a steep trajectory,” he says. “We see ETFs as part of our Market division’s DNA now, and that sets us apart from a number of our investment bank peers, and where we hope to get far more recognition in the future.”
The bank was nominated in five categories in this year’s ETF awards, up from only one in previous years.
“What is resonating with clients, both issuers and investors, is the breadth of our capabilities and the fact we are able to leverage best-in-class technology. Being late to market means, we can invest in the latest innovations and not be saddled with outdated legacy platforms. The upside is huge, and the investments we have made in trading technology alone have seen us climb the RFQ rankings significantly over the last two years.”