As a market observer it is always a topic of interest to see whether European ETF investors have chased performance over the course of a calendar year. Since ETFs can be used as trading tools, such an analysis can highlight fund flow trends which may have been overlooked otherwise. That said, this article sheds a light on the fund flows within the 20 best- and worst-performing Lipper classifications in the European ETF industry over the course of 2024 (all calculations in EUR).
First of all, one may realize by looking at chart 1 that neither the classification Equity U.S. (13) nor Equity Sector Information Technology (12) made it on the list of the 10 best performing ETF classifications of the year 2024. This might be a surprise since there was so much talk about the “Magnificent Seven” over the course of 2024. These results show that the overall average performance of a Lipper classification is depending on more than just a good performance of a handful of stocks, even as those stocks have a very high market share within the respective indices. Nevertheless, Equity U.S. (+€85.1 bn) was the best-selling Lipper classification in the European ETF industry over the course of 2024. These inflows show that the fear of missing out (FOMO) was in full swing over the course of 2024 since these fund flows can be interpreted as a sign that some European investors aimed at least for a neutral position in Equity U.S. in their portfolios, whilst others might have built up an overweight position in this classification.
The best-performing Lipper classification in the European ETF industry was Equity Pakistan, with a stunning average performance of 75.71% over the course of 2024. Despite the attractive average returns, ETFs within this classification faced somewhat very shy outflows. The second-best performing Lipper classification was Alternative Currency Strategies. The exchange-traded funds in this classification achieved an average return of 41.18%, but also suffered slight outflows. Equity Singapore (+37.05%) posted the third-best average performance and inflows of (+0.1 bn).
Graph 1: Performance (in %) and Estimated Net Flows (in bn EUR) of the 20 Best Performing Lipper Classifications in the European ETF Industry (January 1, 2024 – December 31, 2024)
Source: LSEG Lipper
More generally, graph 1 depicts that overall, seven of the 20 best-performing Lipper classifications had outflows varying between €0.001 bn and €1.1 bn. The graph also shows that Equity U.S. and Equity Sector Information Technology were the only two classifications which had significant inflows over the course of the year 2024. This means that European ETF investors had not chased performance over the course of the year. Nevertheless, they may have changed their positioning with regard to Equity U.S., as mentioned before.
On the other side of the table, only 20 of the 168 Lipper classifications in the European ETF industry showed an overall negative average performance. Equity Brazil (-25.34%) was the worst-performing Lipper classification within the European ETF industry. It was bettered by Equity Emerging Markets Latin America (-23.07%) and Equity Mexico (-22.73%). Whilst ETFs classified as Equity Mexico (+€0.1 bn) enjoyed shy inflows, Equity Brazil (-€0.7 bn) and Equity Emerging Markets Latin America (-€0.4 bn) faced slight outflows.
Graph 2: Performance (in %) and Estimated Net Flows (in bn EUR) of the 20 Worst Performing Lipper Classifications in the European ETF Industry (January 1, 2024 – December 31, 2024)
Source: LSEG Lipper
Overall, 10 of the 20 worst-performing classifications faced estimated net outflows ranging from €0.01 bn to €0.9 bn. These flow numbers may also be interpreted as not significant enough to read a market trend from these numbers.
This means either the estimated net flows for the best, nor for the worst performing classifications show that European ETF investors have chased performance over the course of the year 2024. Nevertheless, 2024 was another year with strong inflows into ETFs classified as Equity U.S., which may have driven the market concentration of the index constituents within the indices in the classification further up. This concentration may fire back, once the highest weighted stocks may fail to deliver the results expected by investors.
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 Lipper or LSEG.
