The European ETF industry enjoyed inflows over the course of September 2023. These inflows occurred in a further unstable market environment over the course of the month in which some asset classes nevertheless showed positive results while others performed negatively. The market sentiment was still driven by hopes that central banks—especially the U.S. Federal Reserve—may have reached the last phase of their fight against high and further increasing 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 which might be reflected by the estimated inflows in bond ETFs. Nevertheless, these estimates are under scrutiny, since the Fed stated after its September meeting a hawkish view, as the rate outlook still includes one more rate move this year and fewer rate cuts in 2024. In addition, there are still some concerns about geopolitical tensions and the still ongoing normalization of disrupted delivery chains, as well as the continued possibility of recession in the U.S. and other major economies around the globe. These fears are raised by inverted yield curves, which are seen as an early indicator for a possible recession.
It is noteworthy that market participants are already looking at the possibility of government shutdown in the U.S. in November.
The performance of the underlying markets led, despite the estimated net inflows, to decreasing assets under management (from €1,444.5 bn as of August 31, 2023, to €1,430.8 bn at the end of September). At a closer look, the decrease in assets under management of €13.8 bn for September was driven by the performance of the underlying markets (+€22.9 bn), while the estimated net inflows contributed (+€9.1 bn) to the decline in assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,023.3 bn) held the majority of assets, followed by bond funds (€345.1 bn), commodities products (€33.1 bn), money market products (€20.4 bn), alternative UCITS products (€5.3 bn), and mixed-assets funds (€3.7 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, September 30, 2023
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€9.1 bn). These flows were below the rolling 12-month average (€11.1 bn).
The inflows in the European ETF industry for September were driven by equity ETFs (+€7.0 bn), followed by bond ETFs (+€1.1 bn), money market ETFs (+€0.8 bn), commodities ETFs (+€0.2 bn), and mixed-assets ETFs (+€0.01 bn). On the other side of the table, alternative UCITS ETFs (-€0.03 bn) faced outflows for September 2023.
Graph 2: Estimated Net Sales by Asset Type, September 2023 (Euro Millions)
Source: LSEG Lipper
Assets Under Management by Lipper Global Classifications
In order to examine the European ETF markets in further detail, a review of the Lipper global classifications will lead to more insights on the structure and concentration of assets within the European ETF industry. At the end of September 2023, the European ETF market was split into 166 different peer groups. The highest assets under management at the end of September were held by funds classified as Equity U.S. (€315.8 bn), followed by Equity Global (€221.8 bn), Equity Europe (€68.8 bn), Equity Emerging Markets Global (€68.3 bn), and Equity Eurozone (€49.1 bn). These five peer groups accounted for 50.59% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 62.56%.
Overall, 18 of the 166 peer groups each accounted for more than 1% of assets under management. In total, these 18 peer groups accounted for €1,044.4 bn, or 72.99%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups saw some movement in single positions after the market turmoil caused by the COVID-19 crisis and the following recovery. As the positions of the peer groups had been quite stable in the past, this indicates that European investors use ETFs to trade according to their market views. Even as some of these positions might be core holdings, once investors get into risk-off mode they also reduce their exposure to core asset classes. Nevertheless, these numbers showed assets under management by Lipper global classifications continued to be highly concentrated in the European ETF industry.
Graph 3: Ten-Top Lipper Global Classifications by Assets Under Management, September 30, 2023 (Euro Millions)
Source: LSEG Lipper
The peer groups on the other side of the table showed some funds in the European ETF market are quite low in assets and their constituents risk being closed in the near future. They are obviously lacking investor interest and might, therefore, not be profitable for their respective fund promoters (Please read our report: “Is there a consolidation ahead in the European ETF industry?” for more details on this topic).
Graph 4: Ten Smallest Lipper Global Classifications by Assets Under Management, September 30, 2023 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €13.1 bn. In line with the overall sales trend for September, equity peer groups (+€8.7 bn) gathered the majority of flows by asset type on the table of the 10 best-selling peer groups by estimated net inflows. Given the overall fund flow trend in the European ETF industry, it was not surprising that Equity U.S. (+€4.1 bn) was the best-selling Lipper global classification for September. It was followed by Equity Global (+€4.1 bn) and Bond EMU Government (+€1.4 bn).
These numbers showed the European ETF segment is also highly concentrated when it comes to fund flows by sector. Generally speaking, one would expect the flows into ETFs to be concentrated since investors often use ETFs to implement their market views and short-term asset allocation decisions. These products are made and, therefore, are easy to use for these purposes.
Graph 5: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, September 2023 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for September accounted for €4.4 bn in outflows. These outflows were above the outflows for August 2023.
Bond Emerging Markets Global in Local Currencies (-€0.7 bn) was the Lipper Global Classification with the highest outflows for the month. The category was bettered by Equity Japan (-€0.6 bn) and Bond EUR High Yield (-€0.6 bn)
Assets Under Management by Promoters
A closer look at assets under management by promoters in the European ETF industry also showed high concentration, with only 24 of the 54 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€652.2 bn)—accounted for 45.58% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€190.7 bn)—and the number-three promoter—Xtrackers (€147.2 bn). (To learn more about the concentration of the European ETF market at the promoter level, please read our report: Spotlight on the concentration at the promoter level in the European ETF industry.)
Graph 6: Ten-Top ETF Promoters by Assets Under Management, September 30, 2023 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 93.52% of the overall assets under management in the European ETF industry. This meant, in turn, the other 44 fund promoters registering at least one ETF for sale in Europe accounted for only 6.48% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated with regard to the assets under management by promoter, it was not surprising that seven of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for September. Xtrackers was the best-selling ETF promoter in Europe for September (+€2.6 bn), ahead of iShares (+€2.2 bn) and Vanguard (+€1.8 bn).
Graph 7: Ten Best-Selling ETF Promoters, September 2023 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €10.1 bn. As for the overall flow trend in September, it was clear that some of the 54 promoters (17) faced estimated net outflows (-€1.3 bn in total) over the course of the month.
Assets Under Management by ETFs
There were 3,643 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of September. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 326 of the 3,643 instruments held assets above €1.0 bn each. These products accounted for €964.9 bn, or 67.44%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €228.7 bn, or 15.99%, of the overall assets under management. (Please read our study: Is the European ETF industry dominated by only a few funds? to learn more about the concentration at the single-fund level in the European ETF industry).
Graph 8: Ten Largest ETFs by Assets Under Management, September 30, 2023 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Funds
A total of 1,226 of the 3,643 instruments analyzed in this report showed net inflows of more than €10,000 each for September, accounting for inflows of €27.3 bn. This meant the other 2,417 instruments faced no flows or net outflows for the month (When looking at this statistic, one needs to bear in mind that some of these instruments are convenience share classes that do not report assets under management. This means Lipper can’t calculate fund flows for these ETFs). Upon closer inspection, only 59 of the 1,226 ETFs posting net inflows enjoyed inflows of more than €100 m during September—for a total of €14.4 bn. The best-selling ETF for September was iShares Core MSCI World UCITS ETF USD (Acc) which enjoyed estimated net inflows of €1.2 bn. It was followed by iShares Core S&P 500 UCITS ETF USD (Acc) (+€0.7 bn) and Invesco S&P 500 UCITS ETF Acc (+€0.6 bn).
Graph 9: Ten Best-Selling ETFs, September 2023 (Euro Millions)
Source: LSEG Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during September, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification levels.
Given its size and the overall trend for net sales at the promoter level, it was surprising that only four of the 10 best-selling funds for September were promoted by iShares. These iShares ETFs accounted for total estimated net inflows of €2.7 bn.
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 Refinitiv Lipper or LSEG.
