July 22, 2019

Monday Morning Memo: Review of the European ETF Market, June 2019

by Detlef Glow.

The promoters of ETFs in Europe enjoyed net inflows for June. These led, in combination with a positive performance of the underlying markets, to an increase in the assets under management in the European ETF industry. In more detail, the assets under management in the European ETF industry increased from €721.4 bn as of May 31, 2019, to €746.7 bn at the end of June. The increase of €25.4 bn for June was driven by the performance of the underlying markets (+€22.5 bn), while net sales contributed inflows of €2.9 bn to assets under management in the European ETF segment.

With regard to the overall number of products, it was not surprising equity funds (€510.8 bn) held the majority of the assets, followed by bond funds (€203.9 bn), commodity products (€19.3 bn), alternative UCITS products (€6.4 bn), money market funds (€4.5 bn), mixed-asset funds (€1.8 bn), and “other” funds (€0.2 bn).

It is noteworthy that the shift in assets under management from “other” ETFs towards alternative UCITS ETFs has been caused by the launch of an extended Lipper Global Classification scheme and not by the transactions of investors.

Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, June 30, 2019

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

Fund Flows by Asset Type

The level of estimated net inflows into ETFs stood below average for June. In more detail, the net inflows in the European ETF industry for June (+€2.9 bn) were below the monthly rolling 12-month average (+€4.6 bn). The flows into ETFs were a sign that investors had returned to the markets despite an increased volatility in stock markets globally. That said, it was surprising bond ETFs were again the asset type with the highest net inflows (+€6.0 bn), followed by money market ETFs (+€0.9 bn) and mixed-asset ETFs (+€0.05 bn). Conversely, equity ETFs (-€3.5 bn) faced the highest outflows in the European ETF segment, bettered by alternative UCITS ETFs (-€0.3 bn), commodity ETFs (-€0.1 bn), and “other” ETFs (-€0.03 bn).

This flow pattern drove the overall net flows to +€36.1 bn for 2019.

Graph 2: Estimated Net Sales, June 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

Assets Under Management by Lipper Global Classifications

With regard to the Lipper global classifications, the European ETF market was split into 178 different peer groups. The increase in classifications was caused by the launch of an updated Lipper global classification scheme on May 21, 2019. The highest assets under management at the end of June were held by funds classified as Equity US (€137.7 bn), followed by Equity Global (€69.9 bn), Equity Eurozone (€48.6 bn), Equity Emerging Markets Global (€39.5 bn), and Equity Europe (€38.8 bn). These five peer groups accounted for 44.80% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 58.15%. Overall, 17 of the 178 peer groups each accounted for more than 1% of assets under management. In total, these 17 peer groups accounted for €511.4 bn, or 68.48%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups were quite stable, indicating European investors use the funds from these peer groups as core holdings and not just as so-called satellite holdings that are bought and sold frequently to implement asset allocation strategies in investor portfolios. These numbers showed assets under management in the European ETF industry continued to be highly concentrated.

Graph 3: Ten-Top Lipper Global Classifications by Assets Under Management, June 30, 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

The peer groups on the other side of the table showed some funds in the European ETF market are quite low in assets and 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, June 30, 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

Fund Flows by Lipper Global Classifications

With regard to the overall sales for June, it was not surprising bond funds (+€5.3 bn) dominated the table of the 10 best-selling peer groups by net flows, as well as by the peer group count. Accordingly, the best-selling Lipper global classification for June was Bond EUR Corporates (+€1.9 bn), followed by Bond EUR High Yield (+€1.0 bn) and Money Market EUR (+€0.9 bn).

The net inflows of the 10 best-selling Lipper classifications equalled 129.28% of the overall net inflows. These numbers showed the European ETF segment is also highly concentrated with regard 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, June 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

On the other side of the table, the 10 peer groups with the highest net outflows for June accounted for €5.0 bn of outflows. It is remarkable that one of investors’ favorite classifications—Equity Global (-€1.9 bn)—faced the highest net outflows overall, bettered by Equity Eurozone (-€0.7 bn) and Equity Canada (-€0.5 bn).

Assets Under Management by Promoters

A closer look at assets under management in the European ETF industry by promoters also showed high concentration, since only 21 of the 52 ETF promoters in Europe held assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€347.6 bn)—accounted for 46.54% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€81.5 bn)—and the number-three promoter—Lyxor ETF (€62.4 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, June 30, 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

The 10-top promoters accounted for 93.10% of the overall assets under management in the European ETF industry. This meant, in turn, the other 42 fund promoters registering at least one ETF for sale in Europe accounted for only 6.90% of the overall assets under management.

Fund Flows by Promoters

Since the European ETF market is highly concentrated, it was not surprising that six of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for June. iShares was the best-selling ETF promoter in Europe for June (+€4.5 bn), well ahead of SPDR (+€0.8 bn) and Vanguard Group (+€0.5 bn).

Graph 7: Ten Best-Selling ETF Promoters, June 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

Since the flows of the 10-top promoters accounted for 251.09% of the overall estimated net flows into ETFs in Europe for June, it was clear that some of the 52 promoters (13) faced net outflows (-€4.6 bn in total) over the course of the month.

Assets Under Management by Funds

There were 2,861 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of June. With regard to the overall market pattern, it was not surprising the assets under management at the ETF level were also highly concentrated. Only 162 of the 2,861 instruments held assets above €1.0 bn each. These products accounted for €448.7 bn, or 60.09%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €125.1 bn, or 16.75%, 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, June 30, 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

ETF Flows by Funds

A total of 938 of the 2,861 instruments analyzed in this report showed net inflows of more than €10,000 each for June, accounting for €21.9 bn, or 748.30%, of the overall net flows. This meant the other 1,923 instruments faced no flows or net outflows for the month (By 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). In more detail, only 43 of the 938 ETFs posting net inflows enjoyed inflows of more than €100 m during June, for a total of €11.4 bn. The best-selling ETF for June, iShares Core € Corp Bond UCITS ETF EUR (Dist), accounted for net inflows of €1.8 bn, or 60.84%, of the overall net inflows. It was followed by iShares € High Yield Corp Bond UCITS ETF EUR(Dist) (+€0.9 bn) and iShares MSCI Saudi Arabia Capped UCITS ETF USD Acc (+€0.7 bn).

Graph 9: Ten Best-Selling ETFs, June 2019 (Euro Millions)

Review of the European ETF industry, June 2019

Source: Lipper from Refinitiv

The flow pattern at the fund level indicated there was a lot of turnover and rotation during June, but it also showed the concentration of the European ETF industry even better than the statistics at the promoter or classification level. Given its size, it was not surprising that six of the 10 best-selling funds for June were promoted by iShares. This accounted for total net inflows of €4.4 bn, or 151.99%, of the net inflows into the European ETF segment.

Get In Touch

Subscribe

Related Reports

Since 1965, the FTSE All Share Index has increased during every tenure of government.  ...

U.K. equities are trading slightly below their long-term average based on a 12-month ...

Labour candidate Jeremy Corbyn has pledged to increase the living standard for all ...

Since 1971, the UK corporate tax rate has declined from 40% to 19% today, reaching a peak ...

We have updated our Privacy Statement. Before you continue, please read our new Privacy Statement and familiarize yourself with the terms.×