The European fund flow trends from January 1, 2019, to June 30, 2024, show that there is a clear change in investor behavior in Europe regarding long-term investment funds underway, as European investors seem to prefer ETFs over actively managed funds. That said, we don’t see this trend for all asset types since ETFs play only a minor role for alternatives, commodities, mixed-assets, money market, real estate, and other products. In turn, this means that the trend described above is only visible in the two largest asset types—bonds and equities.
Graph 1: European Fund Industry: Estimated Net Flows by Product Type (in bn EUR)
Source: LSEG Lipper
With regard to this, one may think that it is only bonds and equities, and even in the bond space the trend is not really visible (yet). But within equities the change is so massive that this trend has started to hurt the balance sheets of active asset managers since they were not able to gather new assets in one of the asset types with a high margin. Please see my last “Friday Facts: Will the Growth of Passive Equity Products Start to Hurt Active Managers?” for more information on this topic.
Even as the trend toward ETFs in the bond space is currently not as visible as within the equity segment, one can see that there is some change underway since the market share of bond ETFs of the assets under management in the European ETF industry is higher than the market share of bond products within the European fund industry. This means that bond ETFs do—with regard to their market share of AUM and fund flows—relatively better than their actively managed peers, even though bond ETFs do not currently cover all market segments.
Graph 2: European Fund Industry: Cumulated Estimated Net Flows by Asset and Product Type January 1, 2019 – June 30, 2024 (in bn EUR)
Source: LSEG Lipper
(Please see the European fund industry reviews for 2019, 2020, 2021, 2022, 2023, and H1 2024 for more details on the underlying fund flow trends by asset type.)
With regard to the above, it can be concluded that the behavior of equity investors in Europe has changed over the course of the last three years. This change was so dramatic that it impacted the flow trends for the overall fund industry in Europe. That said, it does look like the trend within the equities segment might also become visible in the bond space in the near future, as the promoters of ETFs in Europe are expanding their coverage in this market segment. The overall trend toward ETFs might get even more support from the increasing number of actively managed ETFs in Europe.
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.
