December 2024 was another month with strong inflows for the European ETF industry.
In fact, the inflows marked a new all-time high for monthly inflows into ETFs in Europe. These inflows occurred in a mainly positive market environment. While most equity markets were on the rise despite the high valuations of the market leaders over the course of the month, some bond segments faced the impacts from rising rates as yield curves have somewhat started to normalize. This might also be the reason why investors are somewhat nervous and reacting quickly on any news that may impact the current market environment negatively. That said, the election of Donald Trump as the next U.S. president had a positive impact on the U.S. equity market and the U.S. dollar.
That said, investors are not only focusing on economic news, as the increasing geopolitical tensions in the Middle East—especially the developments around the Red Sea—are seen as a risk for the general economic growth in Western countries since these tensions have the potential to drive up the price of oil. In addition, a number of shipping companies these days avoid the passage of the Suez channel. It is, therefore, to be expected that prolonged delivery times will cause some tensions for the still vulnerable delivery chains.
Market sentiment was also further driven by the expectations of investors for future central bank decisions. Since the different regions of the world are showing different growth patterns, investors expect less activity from the U.S. Federal Reserve, while they expect much more interest rate cuts from the European Central Bank. As a result, such different central bank activity may lead to a stronger U.S. dollar compared to the euro and other leading currencies. With regard to this, any statement from the Fed and other central banks may have the power to move the bond market in one or the other direction. In addition, fears of increasing debt in the U.S. might be the driver for further increasing interest rates on the long end of the yield curve, which hold back inflows into medium and long-term bond ETFs, while the still inverted yield curves might be the drivers for the inflows into money market ETFs.
That said, inverted yield curves and especially long-term inverted yield curves are seen as an early indicator for a possible recession. However, there are no signs for a recession in the U.S. and most other major economies visible yet. But even as it looks like the yield curves are slowly normalizing, this does not mean that there is no recession possible in the major economies around the globe. This is especially true as some major economies lack economic growth and may need lower interest rates as stimulus. Despite these headwinds, the positive effects of lower interest rates seem to be more important for investors than the current state of some economies.
From an ETF industry perspective, the performance of the underlying markets led, in combination with the estimated net flows, to increasing assets under management (from €2,065.4 bn as of November 30, 2024, to €2,081.8 bn at the end of December). At a closer look, the increase in assets under management of €16.4 bn for December was driven by estimated net inflows, which contributed €31.3 bn to the growth of assets under management, while the performance of the underlying markets (-€14.9 bn) had a negative impact on the assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€1,1565.2 bn) held the majority of assets, followed by bond funds (€413.2 bn), money market products (€53.6 bn), commodities products (€38.3 bn), alternatives products (€7.6 bn), and mixed-assets funds (€3.8 bn).
Given the current market environment, it is no surprise that the overall assets under management in the European ETF industry (€2,081.8 bn) are going from one all-time high to the next month after month. With regard to this, it is no surprise that the assets under management for equity, bond, and money market ETFs also marked an all-time high at the end of the month.
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, December 31, 2024
Source: LSEG Lipper
ETF Flows by Asset Type
The European ETF industry enjoyed strong estimated net inflows (+€31.3 bn) over the course of December which marked a new all-time-high for monthly flows into ETFs in Europe. These flows were way above the rolling 12-month average (€21.4 bn). These inflows drove the overall inflows in ETFs up to €256.4 bn for the year 2024. This marks an all-time for the annual inflows into ETFs in Europe.
The inflows in the European ETF industry for December were driven by equity ETFs (+€27.4 bn), followed by money market ETFs (+€3.1 bn) bond ETFs (+€1.8 bn), and mixed-assets ETFs (+€0.1 bn). On the other side of table, alternatives ETFs (-€0.03 bn) and commodities ETFs (-€1.1 bn) shed money.
Graph 2: Estimated Net Sales by Asset Type, December 2024 (Euro Millions)
Source: LSEG Lipper
Given the current market environment, it was no surprise to see high inflows into ETFs led by equity products over the course of December 2024.
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 December 2024, the European ETF market was split into 168 different peer groups. The highest assets under management at the end of December were held by funds classified as Equity U.S. (€558.4 bn), followed by Equity Global (€376.6 bn), Equity Emerging Markets Global (€88.7 bn), Equity Europe (€85.7 bn), and Equity Eurozone (€64.2 bn). These five peer groups accounted for 56.38% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 66.81%.
Overall, 17 of the 169 peer groups each accounted for more than 1% of assets under management. In total, these 17 peer groups accounted for €1,578.8 bn, or 75.84%, of the overall assets under management.
Graph 3: Ten Largest Lipper Global Classifications by Assets Under Management, December 31, 2024 (Euro Millions)
Source: LSEG Lipper
In addition, it was noteworthy that the rankings of the largest classifications saw some movement in single positions over the last few years. As the positions of the classifications 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 got into risk-off mode they also reduced their exposure to core asset classes.
That said, the ranking changes at the top of the league table which happened during the COVID-19 pandemic have not reversed since and now represent the new normal. Nevertheless, these numbers showed assets under management by Lipper global classifications continued to be highly concentrated in the European ETF industry.
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 may face the risk of 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, December 30, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €31.0 bn. In line with the overall sales trend for December, equity peer groups (+€28.3 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. (+€17.5 bn) was the best-selling Lipper global classification for December. It was followed by Equity Global (+€7.3 bn) and Equity U.S. Small & Mid Cap (+€2.2 bn). The estimated net flows in Equity U.S. and Equity U.S. Small & Mid Cap show that European investors expect the economy in the U.S. to grow after the election of Donald Trump as the next president.
The flows into money market products in the European ETF industry have somewhat further normalized over the course of December. Nevertheless, Money Market EUR (+€1.9 bn), and Money Market USD (+€1.2 bn) are still on the table of the 10 best-selling Lipper classifications for the month despite the fact that money market products in general are not a core asset type within the European ETF industry. The estimated inflows in money market products may be an indicator that European investors have become cautious when it comes to their positioning on the respective yield curves and may want to take profit from the elevated interest rate level on the short end of the yield curves before they return to their normal shape.
More generally, these numbers showed the European ETF segment is also highly concentrated when it comes to fund flows by classification. 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-Lipper Global Classifications by Estimated Net Sales, December 2024 (Euro Millions)
Source: LSEG Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for December accounted for €4.8 bn in outflows. These outflows were below the outflows for 10 peer groups with the highest outflows for November 2024 (€6.0 bn).
Bond USD Corporates (-€0.7 bn) was the classification with the highest outflows for the month. It was bettered by Bond USD Government (-€0.7 bn), Commodity Blended (-€0.6 bn), and Equity U.K. (-€0.5 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 28 of the 59 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€903.6 bn)—accounted for 43.73% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€263.7 bn)—and the number-three promoter—Xtrackers (€228.0 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: The 10 Largest ETF Promoters by Assets Under Management, December 31, 2024 (Euro Millions)
Source: LSEG Lipper
The 10-top promoters accounted for 95.06% of the overall assets under management in the European ETF industry. This meant, in turn, the other 49 fund promoters registering at least one ETF for sale in Europe accounted for only 4.94% of the overall assets under management.
ETF 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 eight of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for December. iShares was the best-selling ETF promoter in Europe for December (+€9.0 bn), ahead of Amundi ETF (+€5.0 bn) and Invesco (+€4.1 bn).
Graph 7: Ten Best-Selling ETF Promoters, December 2024 (Euro Millions)
Source: LSEG Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €30.9 bn. As for the overall flow trend in December, it was clear that some of the 59 promoters (15) faced estimated net outflows (-€1.2 bn in total) over the course of the month.
Assets Under Management by ETFs
There were 4,005 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of December. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 420 of the 4,005 instruments held assets above €1.0 bn each. These products accounted for €1,551.3 bn, or 74.52%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €378.5 bn, or 18.18%, 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: The 10 Largest ETFs by Assets Under Management, December 31, 2024 (Euro Millions)
Source: LSEG Lipper
ETF Flows at Share Class Level
A total of 1,587 of the 4,005 instruments analyzed in this report showed net inflows of more than €10,000 each for December, accounting for inflows of €60.3 bn. This meant the other 2,418 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 122 of the 1,587 ETFs posting net inflows enjoyed inflows of more than €100 m during December—for a total of €42.1 bn. The best-selling ETF for December was Amundi S&P 500 II UCITS ETF Acc, which enjoyed estimated net inflows of €4.2 bn. It was followed by Invesco S&P 500 UCITS ETF Acc (+€3.4 bn) and iShares Core MSCI World UCITS ETF USD (Acc) (+€3.3 bn).
Graph 9: The 10 Best-Selling ETFs, December 2024 (Euro Millions)
Source: LSEG Lipper
The flow pattern at the fund level indicated there was a lot of turnover and rotation during December, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification levels since the 10 best-selling ETFs account for inflows of €18.5 bn.
Given its size and the overall trend for net sales at the promoter level, it was surprising that only three of the 10 best-selling funds for December were promoted by iShares. These iShares ETFs accounted for estimated net inflows of €6.6 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 LSEG Lipper or LSEG.
