Commerzbank is due to launch ComStage ETFs in the UK for the first time next month.
The investment bank will first release a FTSE range on the London Stock Exchange, comprising a FTSE 100 ETF, as well as short and leveraged versions of the blue-chip index. The inaugural range will also include ETFs tracking the FTSE All-Share and FTSE 250.
The funds will be synthetically replicated, using a swap with Commerzbank to return the performance of the underlying indices.
Commerzbank says it also plans to bring some of its other products listed in Germany into the UK. At present, the bank has a range of over 70 ETFs in Germany, with assets between $6-7bn.
Commerzbank head of institutional fund solutions Steven Muzzlewhite says: "We are coming to the UK ETF market off the back of our strong proprietary distribution in Germany. We can produce these products in a low-cost way, on a large scale, due to our significant derivatives trading platform."
He says the UK market is relatively polarised, between demand for swap-based ETFs and traditionally replicated ETFs, although some clients will buy both.
"As an example, synthetic ETF's offer a high level of protection in the sense that they comply with Ucits III regulations and issuers have taken additional steps to make them even more secure by using tools such as over-collateralisation," Muzzlewhite says.
"Our auditor, PricewaterhouseCoopers, confirms that there is no counterparty risk to Commerzbank thanks to over-collateralisation and the internal controls Commerzbank has in place."
Muzzlewhite says in order for retail investors to increase their usage of ETFs, there needs to be a solution to transact ETFs in a similar fashion to mutual funds through platforms and wraps.
He adds: "IFAs deal with a wrap platform and get one consolidated statement. To then have to deal with someone else on the ETF side is inefficient. So IFAs need to access the platforms while having open architecture access to the ETF space."
