April 18, 2022

Monday Morning Memo: Review of the European ETF Market, Q1 2022

by Detlef Glow.

Despite the current situation in Ukraine, Q1 2022 was another positive quarter for the European ETF industry since promoters enjoyed inflows. These inflows occurred in a volatile and negative market environment in which investor sentiment was impacted by increasing inflation rates, geopolitical tensions and the still ongoing COVID-19 pandemic in Europe and other parts of the world. The performance of the underlying markets led in combination with the estimated net inflows to increasing assets under management (from €1,330.5 bn as of December 31, 2021, to €1,334.1 bn at the end of March 2022). The increase of €3.6 bn for Q1-2022 was driven by the performance of the underlying markets (-€34.7 bn), while estimated net sales contributed €38.3 bn to the assets under management.

Graph 1: Assets Under Management in the European ETF Industry, April 11, 2000 – March 31, 2022 (Euro Millions)

European ETF Industry Review Q1 2022

Source: Refinitiv Lipper

It was not surprising equity funds (€958.8 bn) held the majority of assets, followed by bond funds (€309.7 bn), commodities products (€52.6 bn), alternative UCITS products (€6.4 bn), money market funds (€3.5 bn), mixed-assets funds (€3.1 bn), and “other” funds (€0.1 bn).

Graph 2: Market Share, Assets Under Management in the European ETF Industry by Asset Type, March 31, 2022

Source: Refinitiv Lipper

Fund Flows by Asset Type

The European ETF industry enjoyed healthy estimated net inflows of €38.3 bn over the course of the first quarter of 2022.

The inflows in the European ETF industry for Q1 2022 were driven by equity ETFs (+€30.1bn), followed by bond ETFs (+€6.1 bn), commodities ETFs (+€2.0 bn), money market ETFs (+€0.5 bn), mixed-assets ETFs (+€0.1 bn), and “other” ETFs (+€0.01 bn). On the other side of table, alternative UCITS ETFs (-€0.4 bn) were the only asset type that faced outflows over Q1 2022.

Generally speaking, it was surprising that ETFs from all major asset types enjoyed inflows for the Q1 2022 given the in-general negative market environment.

Graph 3: Estimated Net Sales by Asset Type, Q1 2022 (Euro Millions)

European ETF Industry Review Q1 2022

Source: Refinitiv Lipper

 

Fund Flows by Lipper Global Classifications

The net inflows of the 10 best-selling Lipper classifications for Q1 2022 accounted for €40.4 bn. In line with the overall sales for Q1 2022, equity funds (+€30.8 bn) dominated the table of the 10 best-selling peer groups by net flows and peer group count (six). Equity US (+€10.1 bn) was the best-selling Lipper Global Classification for Q1 2022. It was followed by Equity Global (+€10.1 bn) and Bond USD Government (+€4.4 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 4: Ten Best- and Worst-Selling Lipper Global Classifications by Estimated Net Sales, Q1 2022 (Euro Millions)

European ETF Industry Review Q1 2022

Source: Refinitiv Lipper

On the other side of the table, the 10 peer groups with the highest estimated net outflows for Q1 2022 accounted for €11.9 bn in outflows. Generally speaking, it seems like investors reduced their exposure to riskier bond classifications such as high yield bonds. In addition, it was surprising to see that European investors reduced their exposure to USD inflation linked bonds within the current market environment.

 

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 Q1 2022. iShares was the best-selling ETF promoter in Europe for Q1 2022 (+€16.3 bn), ahead of Amundi ETF (+€8.6 bn) and Invesco (+€4.0 bn).

Graph 5: Ten Best-Selling ETF Promoters, Q1-2022 (Euro Millions)

Source: Refinitiv Lipper

The flows of the 10-top promoters accounted for estimated net inflows of €38.2 bn, or 99.573%, of the overall estimated net inflows. As for the overall flow trend in Q1 2022, it was clear that some of the 47 promoters (10) faced net outflows (-€1.9 bn in total) over the course of the first quarter of 2022.

 

The views expressed are the views of the author, not necessarily those of Refinitiv Lipper or LSEG.

 

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