When it comes to exchange-traded funds, sometimes you can’t be all things to all people.
It’s a lesson that Swiss finance firm Zuercher Kantonalbank has taken to heart. And so far it’s working.
The bank -- founded in 1870 and the largest of 24 institutions owned by regional governments, known as cantons -- is hardly a major player in the global ETF market. Indeed, it’s probably best known around the world for its role in a recent U.S. tax fraud case that’s tripped up a dozen other Swiss lenders.
Yet, ZKB’s four funds, all listed in Zurich and all focused on owning physical precious metals, have an average of $1.9 billion in assets, according to data compiled by Bloomberg as of the end of June. That’s more than any other European issuer, including behemoths like BlackRock Inc. and Vanguard Group Inc., the data show.
“The success story behind the ZKB precious metals ETFs is that they combined two things,” said Martin Raab, executive director at Derivative Partners AG in Zurich. “One of them is sticking to a niche. The other is that they had really great market timing.”
Institutional Demand
In Europe’s tough ETF market, which last year suffered the most fund closures since at least 2013, Zuercher’s selective strength is eye-opening. It has the largest or second-largest ETF in every category where it competes.
The bank debuted its physical gold fund -- the ZKB Gold ETF, symbol ZGLD -- in 2006. The metal typically accounts for between 2 percent and 5 percent of Swiss private bank portfolios, and the fund quickly found an audience, according to Andreas Nicoli, head product specialist for index solutions at Swisscanto Invest by ZKB.
“A lot of people were looking for a safe haven,” he said.
Zuercher initially rolled out the gold ETF to accommodate a large institutional client, Nicoli said. But before long the firm saw demand from private banks and family offices. It turns out the ETF structure works particularly well for holding physical precious metals, according to Mike McGlone, a commodities analyst at Bloomberg Intelligence.