September was another positive month for the European ETF industry since promoters enjoyed inflows as economies and securities markets stabilized further after the coronavirus lockdown-induced economic downturn. The negative performance of the underlying markets led to decreasing assets under management (from €877.1 bn as of August 31, 2020, to €870.9 bn at the end of September) despite net inflows. This means the decrease of €6.2 bn for September was driven by the performance of the underlying markets (-€12.1 bn), while net sales contributed inflows of €5.9 bn to assets under management. It was not surprising equity funds (€576.0 bn) held the majority of assets, followed by bond funds (€258.9 bn), commodities products (€25.1 bn), alternative UCITS products (€5.9 bn), money market funds (€3.1 bn), mixed-assets funds (€1.8 bn), and “other” funds (€0.2 bn).
Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, September 30, 2020
Source: Refinitiv Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows for September (+€5.9 bn) which were below the rolling 12-month average. The outflows decreased the rolling 12-month average to €7.5 bn from €8.7 bn in August 2020. The inflows in ETFs were driven by equity ETFs (+€6.9 bn), followed by alternative UCITS ETFs (+€0.1 bn), ”other” ETFs (+€0.01 bn), and mixed-assets ETFs (+€0.004 bn). Meanwhile, money market ETFs (-€0.1 bn), bond ETFs (-€0.2 bn), and commodities ETFs (-€0.9 bn) faced outflows for the month.
This flow pattern drove the estimated overall net inflows to €5.9 bn for the month and €45.8 bn year to date.
Graph 2: Estimated Net Sales by Asset Type, September 2020 (Euro Millions)
Source: Refinitiv Lipper
Assets Under Management by Lipper Global Classifications
In order to examine Lipper global classifications in further detail, the European ETF market was split into 168 different peer groups. The highest assets under management at the end of September were held by funds classified as Equity U.S. (€172.0 bn), followed by Equity Global (€93.0 bn), Equity Eurozone (€45.5 bn), Equity Europe (€43.4 bn), and Bond EUR Corporates (€40.2 bn). These five peer groups accounted for 45.26% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 58.72%.
Overall, 19 of the 168 peer groups each accounted for more than 1% of assets under management. In total, these 19 peer groups accounted for €629.6 bn, or 72.29%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups saw some movements in the single positions after the market turmoil caused by the COVID-19 crisis and the ongoing recovery. Even as positions 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 in the European ETF industry continued to be highly concentrated.
Graph 3: Ten-Top Lipper Global Classifications by Assets Under Management, September 30, 2020 (Euro Millions)
Source: Refinitiv 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 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, 2020 (Euro Millions)
Source: Refinitiv Lipper
Fund Flows by Lipper Global Classifications
The net inflows of the 10 best-selling Lipper classifications accounted for €8.4 bn. As for the overall sales for September, it was not surprising equity funds (+€6.0 bn) dominated the table of the 10 best-selling peer groups by net flows, while the peer group count was even split between equity and bond products. In line with the overall trend, the best-selling Lipper global classification for September was Equity US (+€3.6 bn), followed by Equity Global (+€1.3 bn) and Bond CNY (+€1.0 bn).
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, September 2020 (Euro Millions)
Source: Refinitiv Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for September accounted for €4.7 bn of outflows.
Assets Under Management by Promoters
A closer look at assets under management by promoter in the European ETF industry also showed high concentration, with only 19 of the 49 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€404.4 bn)—accounted for 46.43% of the overall assets under management, far ahead of the number-two promoter—Xtrackers (€94.1 bn)—and the number-three promoter—Lyxor ETF (including the AUM of ComStage) (€72.1 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, 2020 (Euro Millions)
Source: Refinitiv Lipper
The 10-top promoters accounted for 93.80% of the overall assets under management in the European ETF industry. This meant, in turn, the other 39 fund promoters registering at least one ETF for sale in Europe accounted for only 6.20% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated, 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. UBS ETF was the best-selling ETF promoter in Europe for September (+€1.4 bn), ahead of Xtrackers (+€1.1 bn) and iShares (+€1.0 bn).
Graph 7: Ten Best-Selling ETF Promoters, September 2020 (Euro Millions)
Source: Refinitiv Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €6.1 bn. With regard to the overall flow trend in September, it was clear that some of the 49 promoters (13) faced net outflows (-€0.6 bn in total) over the course of the month.
Assets Under Management by Funds
There were 2,940 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 200 of the 2,940 instruments held assets above €1.0 bn each. These products accounted for €530.5 bn, or 60.91%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €137.8 bn, or 15.83%, 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, 2020 (Euro Millions)
Source: Refinitiv Lipper
ETF Flows by Funds
A total of 1,025 of the 2,940 instruments analyzed in this report showed net inflows of more than €10,000 each for September, accounting for €22.0 bn. This meant the other 1,915 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 49 of the 1,025 ETFs posting net inflows enjoyed inflows of more than €100 m during September—for a total of €10.1 bn. The best-selling ETF for September, iShares China CNY Bond UCITS ETF USD Dist, accounted for net inflows of €0.8 bn. It was followed by Lyxor Nasdaq-100 UCITS – Dist USD (+€0.6 bn) and Invesco EQQQ Nasdaq-100 UCITS ETF Dist (+€0.5 bn).
Graph 9: Ten Best-Selling ETFs, September 2020 (Euro Millions)
Source: Refinitiv 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 on the promoter level, it was surprising that only two of the 10 best-selling funds for September were promoted by iShares. These ETFs accounted for total estimated net inflows of €1.1 bn.
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