GENERAL OVERVIEW
It was not surprising to see that the global ETF industry enjoyed overall inflows over the course of the first half of 2023. Nevertheless, these inflows occurred in an unstable market environment in which some asset classes showed positive results, while others performed negatively. The market sentiment was driven by hopes that central banks-especially the U.S. Federal Reserve-may have reached the last phase of their fight against high inflation rates and may, therefore, start to keep interest rates at least stable quite soon. Some investors already expect that there might be room for decreasing interest rates later this year, but these expectations might be too positive given the hawkish statements from the Fed and other central banks such as the European Central Bank (ECB).
In addition, there are still concerns about the war in Ukraine and other geopolitical tensions. Investors are also concerned about the normalization of the disrupted delivery chains. Even as China seems to be back on track after reopening of the economy, there are still some frictions in the system.
Additionally, market participants are still concerned about a possible recession in the U.S. and other major economies around the globe. These fears are raised by long-term (12 month+) inverted yield curves which are seen as an early indicator for an upcoming recession.
Within this market environment, the promoters of ETFs enjoyed overall inflows (+$334.4 bn) around the globe.
Table 1: General Overview on Global Assets Under Management and Estimated Fund Flows by Regions and Major ETF Domiciles.
Source: LSEG Lipper
ASSETS UNDER MANAGEMENT
Assets under management in the global ETF industry stood at $10,212.4 bn at the end of June 2023. The majority of these assets ($7,908.0 bn) were held in equity ETFs. This category was followed by bond ETFs ($1,945.9 bn), commodities ETFs ($178.4 bn) alternatives ETFs ($78.1 bn), money market ETFs (?59.2 bn), mixed-assets ETFs ($38.4 bn), “other” ETFs ($8.2 bn), and real estate ETFs (?0.01 bn).
Graph 1: Market Share Assets Under Management in the Global ETF Industry by Asset Type – June 30, 2023
Source: LSEG Lipper
ASSETS UNDER MANAGEMENT BY REGION, JUNE 30, 2023
ETFs domiciled in North America ($7,617.2 bn) held the highest assets under management in the global ETF industry at the end of June 2023. They were followed by ETFs domiciled in Europe ($1,538.7 bn), ETFs domiciled in the Asia Pacific region ($1,032.0 bn), ETFs domiciled in Middle and South America ($17.2 bn), and ETFs domiciled in Africa ($7.4 bn).
Graph 2: Assets Under Management in the Global ETF Industry by Region – June 30, 2023 (in mn USD)
Source: LSEG Lipper
In more detail, the U.S. was the largest single country ETF domicile (($7334.0 bn) at the end of June 2023, followed by Ireland ($1,058.9 bn), Japan ($505.2 bn), Luxembourg ($323.4 bn), and Canada ($283.3 bn). These five ETF domiciles account for assets under management of $9,504.6 bn, or 93.03%, of the overall assets under management in the global ETF industry.
ASSETS UNDER MANAGEMENT BY LIPPER GLOBAL CLASSIFICATION, JUNE 30, 2023
Equity U.S. held by far the highest assets under management ($3,215.5 bn). It was followed by Equity U.S. Small & Mid Cap ($655.7 bn), Equity Global ex U.S. ($613.6 bn), Equity Japan ($532.4 bn), and Equity Global ($345.6 bn).
Graph 3: The 20 Largest Lipper Global Classifications by Assets Under Management- June 30, 2023 (in mn USD)
Source: LSEG Lipper
A closer review of the assets under management by Lipper Global Classification shows that the 10 largest classifications held $6,840.4 bn, or 66.96%, of the overall assets under management of the global ETF industry, while the largest 20 classifications account for $8,093.8 bn, or 79.23%, of the overall assets under management at the end of June 2023.
ASSETS UNDER MANAGEMENT BY PROMOTERS, JUNE 30, 2023
BlackRock (iShares) is the largest promoter of ETFs globally ($3,243.5 bn). It is followed by Vanguard ($2,308.7 bn), State Street Global Advisors (SPDR) ($1,162.0 bn), Invesco ($460.2 bn), and Charles Schwab Investment Management ($293.3 bn).
Graph 4: Assets Under Management of the 20 Largest ETF Promoters Globally, January 1 – June 30, 2023 (in mn USD)
Source: LSEG Lipper
As chart 4 shows, the assets under management in the global ETF industry are even more highly concentrated at the promoter level than on the domicile or classification level.
The top three ETF promoter globally account for assets under management of $6,714.2 bn, or 65.72%, of the overall assets under management, while the top 10 promoters account for $8,341.8 bn, or 81.65%, of the overall assets under management and the top 20 promoters account for $9,087.2 bn, or 88.95%, of the assets under management held by ETFs globally.
GLOBAL ETF FLOWS
The global ETF industry enjoyed healthy overall inflows (+$334.4 bn) over the course of the first half of 2023.
GLOBAL ETF FLOWS BY REGION, YEAR TO DATE
By reviewing the estimated flows in the global ETF industry by fund domicile and the respective regions one needs to bear in mind that some domiciles have specific advantages or disadvantages when it comes to ETF distribution. The U.S. is for example a single market and can take profit from the size of the overall market, while in Europe every market is or at least can be an ETF domicile, which means that the local markets are much smaller.
That said, the EU countries have established a fund regulation (Undertakings in Collective Investments and Transferable Securities or UCITS) which enables the fund and ETF industry to cross list all products which are registered for sale in one EU country into another EU country. Since UCITS has become such a well-recognized regulation standard for mutual funds and ETFs, some countries in South and Middle America, as well in Asia, allow UCITS funds to be cross listed and sold to local investors. It is fair to say that there is no other regulatory framework available that allows funds to be distributed in various countries. Other mutual recognition agreements, such as those between Hong Kong and China or Hong Kong and Taiwan, are only bilateral and have no global reach. This means that the estimated flows for European ETFs may also include flows from South and Middle America, as well as from Asia.
As to be expected, ETFs domiciled in North America (+$229.2 bn) enjoyed the highest estimated net inflows over the course of the year 2023 so far. They were followed by ETFs domiciled in Europe (+$75.6 bn), Asia Pacific (+$29.7 bn), and Africa (+$0.4 bn). ETFs domiciled in South and Middle America faced outflows (-$0.5 bn), which is the opposite of the general trend.
Graph 5: Estimated Net Sales by Region, January 1 – June 30, 2023 (in mn USD)
Source: LSEG Lipper
GLOBAL ETF FLOWS BY ASSET TYPE, YEAR TO DATE
Given the overall market environment it was somewhat surprising that bond ETFs (+$160.1 bn) were the best-selling asset type for the first six months of 2023. They were followed by equity ETFs (+$158.0 bn), money market ETFs (+$8.1 bn), alternatives ETFs (+$7.7 bn), and “other” ETFs (+$2.8 bn). On the other side of the table, real estate ETFs (-$0.0001 bn), commodities ETFs (-$0.3 bn), and mixed assets ETFs (-$2.0 bn) all lost money.
Graph 6: Estimated Net Sales by Asset Type, January 1 – June 30, 2023 (in mn USD)
Source: LSEG Lipper
The fact that investors around the globe bought further into bond ETFs might be seen as a sign that investors may anticipate a possible ending of the interest hiking cycle of central banks around the globe led by the U.S. Federal Reserve. Therefore, this positioning might be seen as a bet against the hawkish statements of the Fed and the ECB, which were indicating that they will further hike interest rates.
GLOBAL ETF FLOWS BY LIPPER GLOBAL CLASSIFICATIONS, YEAR TO DATE
A closer look at the best- and worst-selling Lipper Global Classifications for the first six months of 2023 shows that investors are somewhat in a mixed mode with regard to their risk appetite. This is because the table of the 10 best-selling Lipper Global Classifications is composed of five bond classifications, four equity classification and one alternative classification. Nevertheless, Equity U.S. (+$52.8 bn) was the best-selling Lipper Global Classification for year to date. It was followed by Bond USD Government (+$44.0 bn), Bond USD Government Short Term (+$27.6 bn), Equity Global ex U.S. (+$25.0 bn), and USD Corporates (+$22.4 bn).
Graph 7: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, January 1 – June 30, 2023 (in mn USD)
Source: LSEG Lipper
On the other side of the table, Equity Theme Natural Resources (-$10.9 bn) faced the highest outflows for the year so far. It was bettered by Bond USD Inflation Linked (-$9.9 bn), Alternative Equity Leveraged (-$6.2 bn), Equity Sector Healthcare (-$5.2 bn), and Bond USD High Yield (-$3.7 bn).
An in-depth look at the 10 classifications with the highest outflows indicates that investors around the globe may expect inflation rates to fall further and lower economic growth. As a result, Equity Sector Real Estate U.S. (-$3.6 bn), Equity Sector Energy (-$2.3 bn), and Commodity Blended (-$2.3 bn) are also on the list of the 10 Lipper Global Classifications with the highest outflows over the course of the first six months of 2023.
GLOBAL ETF FLOWS BY PROMOTERS, YEAR TO DATE
Vanguard (+$74.9 bn) is the best-selling ETF promoter globally over the course of the year so far, ahead of BlackRock (iShares) (+$66.1 bn), JPMorgan (+$24.8 bn), State Street Global Advisors (SPDR) (+17.1 bn), and Charles Schwab Investment Management (+14.5 bn).
Graph 8: Twenty Best-Selling ETF Promoters Globally, January 1 – June 30, 2023 (in mn USD)
Source: LSEG Lipper
Overall, the 20 best-selling ETF promoters account for estimated net inflows of $279.0 bn.
This report is for information purpose only. The views expressed are the views from the author, not those of Lipper or LSEG.
*This report covers all ETFs in the Lipper database which are domiciled in one of the following ETF domiciles: Australia, Brazil, Canada, Chile, China, Colombia, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Indonesia Ireland, Israel, Japan, Korea (Republic of), Luxembourg, Malaysia, Mauritius, Mexico, the Netherlands, New Zealand Norway, Pakistan, Peru, the Philippines, Qatar, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates (UAE), USA, and Vietnam.
