Christopher Johnson: Welcome to Morningstar UK. Today I’m joined by Robin Laidlaw, head of distribution, Europe at Vanguard Asset Management, to talk about all things ETFs as well as to gain some insights into her career path. So, Robin, you have been recognized by Morningstar as being a distinguished leader within the ETF space. In your view, what does it take to be a successful leader? What what skills do you need to to thrive within this industry?
Robyn Laidlaw: Thanks, Chris. And, you know, thank you for the invitation and also for the recognition, which is really appreciated. I think in terms of being a leader in this industry, I think it’s about two things. I think it’s about service and it’s about purpose. And so maybe starting with purpose. I feel very fortunate to be a leader in the industry, working for an organization like Vanguard, because we do have a clear purpose and that is to take a stand for all investors to give them the best chance of investment success. So it really, for me is a really inspiring thing. And for the team at Vanguard, because we do genuinely have a very mission-oriented approach to our business and to lead with purpose is really fundamental for us and for our team and for our business and what we’re doing to be successful in Europe.
So purpose is really important. And doing something that adds up to more than you know yourself as an individual. On the topic of service I do think that leadership is about being in service to others. So it could be our clients. We’re there to serve them at Vanguard. It could be, leading by being in service to the team that you’re leading. And that’s a really important aspect to me as well. So it’s about really being there day to day to make sure we can do what we need to do: if it’s launching new products, if it’s helping clients with the queries, if it’s going out and meeting with clients and telling them about how Vanguard can help them. These are the things that really inspire great leadership and it’s a real privilege to be part of that.
Why Will Fixed Income ETFs Grow in 2025?
Johnson: Robyn, I want to move on to ETFs. What are the trends that are driving the ETF market this year? What do you think we should be paying close attention to?
Laidlaw: Well, I think that there’s three trends really that we would talk about in the ETF market: ones that we’re watching and ones that are having a material impact. First of all, I think the growth of fixed income ETFs and the growth in the use of those products and portfolios, as more products come to market, makes for far greater flows. So we saw, a really big number of flows in 2024, around 57 billion. And we think that amount in 2025 will be even greater. And now we’re in an environment of higher interest rates, that means it is a great time again for fixed income and client portfolios. And we can see that both across the demand for investment grade, but also government bonds as well. So this is a really good opportunity for investors because fixed income is offering a great risk return trade off.
And we know what acts as a ballast in asset allocation and portfolios and helps investors during times where there might be more volatility in equity markets. So it’s a great time for fixed income and we just see that there’s going to be continued growth in the use of fixed income ETFs. It’s just such a great way of getting diversified exposure to a range of fixed income versus investors buying individual bonds. So that’s trend number one that we’re keeping an eye on if we also think about what’s happening in the retail adoption of ETFs. That’s another exciting space. So we can see across the UK and Europe more and more investors take to using ETFs. We’ve seen products like ETFs be really popular with the retail market and other markets that Vanguard participates in such as Australia and the US.
So to see this trend really gathering pace in Europe is exciting and what I would say is that for the retail market the barriers to entry are lowering with an increase in online brokering services, online banking services, and this will bring a whole new generation of investors to the ETF market. We think that trend is only going to continue. And Germany has been a big market for that. We’ve really seen a lot of the German retail market start to use ETFs and that trend is sort of going into other regions as well. So we think we’ll see a lot more. And for us at Vanguard we’ve had a lot of support from those retail investors using our core products as a great long-term portfolio, construction building blocks. And we expect that to continue.
I think another place we see that is Vanguard has its own direct consumer platform in the UK market. You might be aware of that. And we know that demand for ETFs versus funds is increasing, and that moved from 21% to over 26% in the last year. So, I think the ETF vehicle for retail investors is continuing to gain momentum. So that’s a couple of things, Chris.
And I guess a third trend that we are talking a lot about is you know, the market fragmentation and what we are seeing in Europe is just more efforts toward perhaps consolidation. And we think that is a good thing. If we think about potential consolidation of exchanges in Europe, that’s a trend that would be very good for the retail market because we would see then a consolidation of trading which means better liquidity which means better spreads, which equals lower costs for retail investors. So that’s something else we are interested in and excited about.
Why Is Vanguard Losing Out to iShares?
Johnson: According to Morningstar’s ETF Asset Flow’s Q4 2024 report, Vanguard ranked fourth out of the top 20 ETF and ETC providers. So, what are you going to do this year to maintain or develop your competitive edge, to compete with the likes of iShares, Amundi, and Xtrackers that have really dominated and have stolen a lot of market share what are you planning to do?
Laidlaw: Well, I would say that Vanguard has built out our position in the European ETF market on a very select product range. And I think to answer your question, we will continue to develop that product range. But I think our way of doing that is to be very selective about what we’re putting to market. And we do think about the enduring success of those products rather than riding particular investment trends that might be short in nature.
So that’s point number one. I think the second point is that I feel really confident that Vanguard is going to continue to play a very significant role in the European ETFs market, and that’s because we anticipate playing a very significant role in European investor portfolios and that is the outcome. The market share is the outcome of that. It’s not the goal in itself. The goal in itself is we really want to help more and more investors of all types across Europe access great quality ETFs for great investment outcomes.
Johnson: Robin is there anything that you can maybe learn from these other ETF providers to then apply that within your own strategy to push your ETF products out? What would you say to that?
Laidlaw: I think what we would always look at our competitors and think about what they’re doing and understand the position they play. But really for us, we have a very clear investment philosophy at Vanguard. We have this year; we are actually celebrating our 50-year anniversary. So Vanguard has an incredibly long track record of success in the ETF market, success in offering investment products to investors. And we spent a lot of time researching both investment markets, capital markets, as well as investors to understand their needs. And so we feel pretty confident about the role we play and our position in the market. And that’s what we focus on: serving investors, not what competitors are doing.
What Makes a Successful Career?
Johnson: And I love to normally ask this question to very successful people. What would you tell your younger self about your career path? What advice would you give her if you can speak to her right now what would you say?
Laidlaw: I would say you know, it’s interesting when people talk about a career because it always makes me think perhaps there’s a perception that you can control things into the future. And I think I would say from my own experience that you really have to be open minded about what you might do in the future because sometimes opportunities present themselves that you don’t anticipate. And I think that’s been my experience moving from being on the client side of the business to working within ETF product development and management at Vanguard and moving back to the client side. And I couldn’t have envisaged that. My advice would be to take opportunities as they come up. You know, continue to lean in and learn new things. It’s interesting. It’s really exciting. That’s important in developing your career because those are the opportunities to really learn and grow when you do different things and you don’t always know when that’s going to present itself.
I think the other advice I would give myself is really focus on investing into always developing your skills and competencies and ask for feedback as you go, ask for feedback from your boss, from your colleagues. That’s really helped me. I think working with great people who were willing to support me and developing myself over the years. The other thing I would say is control the things you can control because I think you can really do a lot to keep focusing on how you develop those skills and competencies. And it’s not always about the next job. It’s about doing the very best you can at the current job and continuing to do that better and better. And I think that takes you a long way. Success in your current role always leads to the next one. So stay focused on that. I would also advise my younger self.
Johnson: This is Christopher Johnson for Morningstar UK.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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