The “Source” joint venture raises a host of interesting questions, aside from the ones you mention, Paul.
First on my list is why the two felt the need to pair together to bring swaps-based products to market. Both are hefty franchises, and they compete toe-to-toe in so many areas. Why did they feel the need to partner to tackle the ETF market in Europe?
Also, what will they do to give their new products a competitive edge against competing European funds? Or will they simply market to their network of users, and not try to ignite broader interest in the European trading community?
Speaking of which, I’ve spent an inordinate amount of time over the past few weeks looking at European ETF data. One of the things that struck me is how fragmented the trading is among European ETFs. The number of “zombie” listings which trickle along with very little trading activity (sometimes not trading for days) is significant. Clearly, some of that is the early stage of development in the ETF market in general, and some is the nature of the ETF market as a whole. And of course, the fragmentation of the market across multiple exchanges, currencies and listings complicates things tremendously.
There are also, however, many asset categories where we’ve simply yet to see a “best of breed” winner emerge—one fund that can collect a majority (or even a strong minority) of the existing trading volume in a region. I wonder if Goldman and Morgan, with their giant scope, plan to try to do that. (Good luck if that’s true.)
As for why Morgan Stanley would let both Paul Mazzilli and Debbie Fuhr go just months before making a major move into ETFs, you’ve got me there. The team that’s left at Morgan Stanley is still very competent, lead by Dominic Maister. But Paul and Debbie were very bright stars indeed. (Fuhr has landed at Barclays, which makes a great deal of sense; Mazzilli, as far as I know, is still exploring his options.)
