Jennifer Grancio is managing director and head of global business development for iShares, the exchanged-traded fund business of BlackRock. Grancio is also a member of the Global iShares Executive Committee and BlackRock's Americas Executive Committee.
Previously, as head of distribution for iShares in the United States, Grancio led sales, marketing and distribution strategy for the firm's more than $400 billion of assets under management by Retail, Institutional and Registered Investment Advisor customers. Prior to that, Grancio served as head of distribution for iShares' European business.
During her tenure at iShares, Grancio and her colleagues have helped transform exchanged-traded funds from a little-known investment vehicle to a global industry with a market size of nearly $1.2 trillion worldwide.
BlackRock has become the largest manager of ETFs, worldwide. The company now manages more than 460 funds involving stocks, bonds and commodities. They trade on 19 exchanges.
Recently, BlackRock said it would be the first company of any type to list securities with BATS Global Markets, in the United States. The company also expanded its footprint in Canada.
Here's how Grancio looks at the ETF market and where iShares is headed.
MME: In your year-end report on the global landscape for exchange-traded funds, you found that fixed income exchange traded products were the fastest growing asset category in 2011, with assets under management increasing by 24.4%, or $50.6 billion.
Do you expect that trend to continue in 2012?
Jennifer Grancio: Yes, we expect the growth in fixed-income ETFs to continue. They are already off to a great start this year. They had a record in monthly net inflows in January with $9.1 billion globally.
MME: What categories of exchange-traded products do you expect to have strong upward movement this year (2012) and why?
Grancio: We expect that in this challenging environment of low yields, that investors will continue to seek yield from passive fixed income and equity-oriented ETFs and diversified exposure through international ETFs. With ebbing concerns about the economy in Europe and the outlook for an extended period of low interest rates in the U.S., investors are increasingly using ETPs as the "go to" investment. Already this year ETPs are setting cash inflow records. On top of the fixed income record, January was the global ETP industry's best January with $34.1 billion of net inflows.
MME: Downward? And why?
Grancio: What's interesting about ETFs is that while an asset class can have underperforming returns and in turn mutual fund flows can decline, it's hard to predict if ETF flows will follow the same trend. Case in point, municipal bonds did not perform very well in 2011 and mutual funds had approximately $12 billion in outflows, but the municipal ETFs had inflows of $350 million.
MME: What do you expect the appetite to be for ETFs based on U.S. stocks?
Grancio: If January is any indication, there is appetite for equities. Global equity inflows rose to $22.6 billion, a level not seen since October 2011.
MME: What do you expect will be the interest level in emerging or pioneer market ETFs?
Which regions do you expect to attract the most interest and why?
Grancio: Investors and advisors are interested in emerging markets exposure to diversify their portfolios. They also recognize that certain countries or regions may perform better than others, so they are using ETFs to get specific exposures. Recognizing this demand, iShares is building out its emerging markets products to help clients execute specialized strategies such as country rotation or global tactical management.
MME: From an iShares perspective, why did you buy Claymore Canada, from Guggenheim? What do you gain by that?
Grancio: BlackRock has entered into a definitive agreement to acquire Claymore Canada. We believe that this transaction brings together two innovative investment fund providers and creates an unparalleled opportunity to serve our Canadian clients. Claymore Canada brings a complementary set of ETFs to the iShares range of products and enhances our ability to compete against other investment fund providers in Canada.
MME: Why did you decide to be the first company to list securities on the BATS exchange? How does having a third place in the U.S. to list securities help you?
Grancio: We're excited to be the first ETF provider to list products on BATS Exchange. The markets continue to evolve and BATS' innovative approach to the markets is aligned with our continued commitment to bringing clients the most innovative and highest quality products.
MME: What other products are in development this year from iShares that are noteworthy?
Grancio: We plan to offer an increased number of products than in previous years because we see an acceleration of interest for passive ETFs and solutions packaged in an iShares ETF from all types of investors and advisors. Clients are interested in more targeted international equities, domestic and international fixed-income and packaged solutions, such as asset allocation fund of funds, that are in an iShares ETF.