Over 0.6 billion assets, 9 funds on offer, and soon new ETFs – 5 years have passed since BETA ETF entered the Polish financial market.
Robert Sochacki, President of the Management Board of BETA Securities Poland SA (BETA ETF) – When the cooperation between BETA Securities Poland SA and AgioFunds TFI SA, which finally led to the creation of investment funds under the BETA ETF brand, started in 2015, no one expected that BETA ETF would become the leading provider of this type of funds in the Polish market. Being a pioneer in creating ETFs based on Polish law was not an easy task. The effective functioning of the ETF required the cooperation of many institutions, such as the Warsaw Stock Exchange, Central Securities Depository of Poland, Polish Financial Supervision Authority, custodian, animator, and offering entity. This complex partnership required coordination and understanding of the essence of such funds. Our first fund, BETA ETF WIG20TR, debuted on the Warsaw Stock Exchange in January 2019 and the moment of debut was crucial. It infused new energy and motivation to work and expand the offer, allowed us to believe that success is within reach. By January 2022, we had introduced a further 8 funds, which are attracting more and more investor interest, as seen in the inflows, turnover, and number of transactions. We are currently in the process of introducing further products to our offering. They will appear on the market within the next few months.
Izabela Olszewska, member of the board of the Warsaw Stock Exchange – The first Polish ETF was extremely important for us, being a milestone in the development of the ETF market in Poland. Such products were already popular in global financial markets at that time, and we knew it would be the same here. The appearance of a Polish ETF on the Warsaw Stock Exchange has contributed to increased interest in the Warsaw Stock Exchange’s product offer, as well as attracting new domestic and foreign investors to our capital market. Passive investing is gaining popularity in the global markets and attracting more and more new investors. Exchanges around the world are expanding their offerings in this segment. The ETF market is becoming richer, offering a wide range of tools providing geographic, sectoral, or even ESG exposure. There are currently over 10,000 listed ETFs worldwide. After another year of high inflows, it is expected that the value of assets gathered in them by the end of 2023 will be at a record level exceeding 11.5 trillion USD.
It is estimated that of the 2 trillion of Polish financial assets, 30 billion are invested in traditional equity funds. Analyzing the development of ETF products abroad, it is believed that with index investing we are at a similar stage in Poland as the United States several decades ago. Within a year, the number of passive funds increased from 39 to 44 due to the opening of 7 new funds (2 removed). The 44 funds are made up of 35 index funds and 9 ETFs. Although the assets in question have grown to record levels from 4.2 to 4.9 billion PLN, the share of passive funds in the entire market is still only 1.5%. Comparing this value to over 20% in Europe or over 40% in the United States shows that the Polish fund market is just at the beginning of the passive revolution and we still have a lot to catch up to the West.
Izabela Olszewska, member of the Warsaw Stock Exchange board – The major challenge for the development of the ETF market in Poland is the legal structure of domestic ETFs. Unlike in European markets, the concept of ETFs adopted in Poland is based on the structure of a closed-end investment fund (FIZ), which qualifies it as an alternative investment fund. Foreign ETFs operate as open investment funds (FIO), i.e., UCITS type funds, which are much more flexible. Current regulations potentially limit the possibilities to expand assets of domestic ETFs abroad. For foreign investors, the different legal structure of the funds may pose an investment barrier. This puts Polish ETF fund issuers in a less competitive position compared to foreign issuers who distribute their products in our country, but without listing them on the domestic exchange. If the offer of ETFs on the Warsaw Stock Exchange could significantly expand, I am convinced that many investors would choose to trade these instruments on the Warsaw Stock Exchange instead of on foreign exchanges, thus contributing to the development of the Polish capital market. In order to remove barriers to further development of ETFs in Poland, it is necessary to introduce a key change in the Investment Funds Act: the basis of the national portfolio fund concept on the structure of an open fund and the transformation of the previously established portfolio funds.
Over the past 5 years, BETA ETF funds have collected nearly 600 million zlotys in assets under management. The most popular solution currently is BETA ETF mWIG40TR, which has gathered nearly 220 million zlotys. BETA ETFs are flexible investment funds that combine long-term passive investors with active seekers of investment opportunities. Since 2019, more than 435 thousand transactions have been concluded on BETA ETF funds, amounting to over 2 billion 875 zlotys, of which over 1 billion was in the last year. It’s also important to note that through physical replication, changes in the assets of BETA ETF funds provide additional liquidity for companies. Of course, investment funds are all about return rates. Although it may not be intuitive, the implementation of an index investment policy can be an attractive solution for investors. For instance, in the TOP5 funds of 2023, there are as many as 2 BETA ETF solutions (WIG20lev and Nasdaq-100) with return rates over 50%.
BETA ETF funds are instruments that combine different groups of investors. For those just beginning their investment journey, well-diversified ETFs are excellent wealth-building tools. An undeniable favorite among investors from our offering is the BETA ETF sWIG80TR. This is the only solution on the Polish market providing direct exposure to small companies only. The 56 million zlotys gathered there, from individual investors only, attests to the trust in our structure and growing popularity of small Polish companies. It’s worth noting that thanks to full physical replication, every company from sWIG80 has been included in our fund. Therefore, the liquidity of the entire index is increasing. Individual investors have received a flexible solution for a complete set of small Polish companies. Furthermore, it’s worth emphasizing that on this ETF fund, thanks to the quotations provided by multiple investors, the average spread for transactions reaching several tens of thousands of zloty, hovers around 0.3%. This spread exceeds even 1.0% for underlying assets. This is another proof of the undeniable advantages of ETF funds.
