Friday Facts: European ETF Flow Insights – January 2025

The European ETF industry enjoyed strong estimated net inflows (+€29.0 bn) over the course of January. These flows were way above the rolling 12-month average (€22.0 bn) and might be an indicator that the European ETF industry is set to continue to grow above average over the course of 2025.

The inflows in the European ETF industry for January were driven by equity ETFs (+€24.0 bn), followed by bond ETFs (+€3.6 bn), money market ETFs (+€1.7 bn), and mixed-assets ETFs (+€0.1 bn). On the other side of table, commodities ETFs (-€0.03 bn) and alternatives ETFs (-€0.4 bn) shed money.

Estimated net flows in the equity segment are looking like business as usual upon first viewing, as Equity US (+€8.2 bn) and Equity Global (+€7.7 bn) were dominating the table of the 10 best-selling Lipper Global Classifications for the month. A closer view of the 10 best-selling Lipper classifications, however, shows that Equity Eurozone (+€1.4 bn) and Equity Europe (+€1.2 bn) have achieved returns placing them on the table of the 10 best-selling Lipper Global Classifications—these inflows are remarkable since European investors were reducing their exposure to the “old continent” over a long period of time. With regard to this, we need to wait and see if this is the beginning of a new trend or just a single month with strong estimated inflows in European equities.

Graph 1: Ten Best- and Worst-Lipper Global Classifications by Estimated Net Sales, January 2025 (Euro Millions)

Source: LSEG Lipper

On the other side of the table, Equity Sector Energy (-€0.5 bn) faced the highest outflows for the month. This may indicate that European ETF investors are anticipating higher drilling activity in the U.S., which may lead to a lower price for oil in the future.

There was one trend in the bond segment over the course of January which roused my attention and might become a topic to watch in the future. While Bond Global Corporates USD (+€0.2 bn) enjoyed inflows for the month, all other corporate bond classifications faced outflows. In more detail, Bond Global Corporates EUR (-€0.1 bn), Bond GBP Corporates (-€0.1 bn), Bond EUR Corporates Short Term (-€0.2 bn), Bond EUR Corporates (-€0.4 bn), and Bond USD Corporates (-€0.5 bn) all faced outflows, leading to overall outflows of €1.0 bn from corporate bond classifications. These outflows from corporate bonds might be sign that European investors are readjusting their bond portfolios, as the spreads for investment grade corporate bonds have become very tight and may have more potential for negative surprises than positive impact on the performance of the respective bonds.

This assumption is backed by the inflows into government bond classifications. Even as Bond EMU Government (+€1.0 bn) was the only government bond classification which made the table of the 10 best-selling classifications, other government bond classifications such as Bond USD Government (+€0.7 bn), Bond EMU Government Long Term (+€0.6 bn), Bond EMU Government Medium Term (+€0.4 bn), and Bond USD Government Short Term (+€0.3 bn) enjoyed healthy inflows too. In conjunction with the outflows from corporate bonds, these inflows could be interpreted as a flight to quality.

In addition to this, we once again witnessed strong inflows into Money Market EUR (+€1.5 bn) for the month, which may also back the assumption that European ETF investors are reducing the risks in their bond portfolios. However, one needs to bear in mind that the flows into money market products might be a result of the still somewhat inverted yield curves as investors may wanted to harvest higher interest rates with lower duration risk as in the bond segment.

This article is for information purposes only and does not constitute any investment advice.

The views expressed are the views of the author, not necessarily those of LSEG.