Detlef Glow
July 18, 2022

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

by Detlef Glow.

June 2022 was the first negative month for the European ETF industry since March 2020, as promoters faced slight estimated outflows. These outflows occurred in a negative and volatile market environment in which investor sentiment was impacted by high inflation rates, increasing interest rates, geopolitical tensions, and disrupted delivery chains caused by the still ongoing COVID-19 pandemic in Europe and other parts of the world. The performance of the underlying markets led to decreasing assets under management (from €1,308.7 bn as of May 31, 2022, to €1,240.0 bn at the end of June). In more detail, the decrease of €68.8 bn for June was driven by the performance of the underlying markets (-€68.8 bn), while estimated net outflows contributed negative €0.01 bn to the assets under management.

As for the overall structure of the European ETF industry, it was not surprising equity funds (€873.8 bn) held the majority of assets, followed by bond funds (€301.4 bn), commodities products (€51.1 bn), alternative UCITS products (€6.2 bn), money market funds (€4.3 bn), mixed-assets funds (€3.1 bn), and “other” funds (€0.1 bn).

Graph 1: Market Share, Assets Under Management in the European ETF Segment by Asset Type, June 30, 2022

Source: Refinitiv Lipper

Fund Flows by Asset Type

The European ETF industry faced for June the first estimated net outflows (-€0.01 bn) since March 2020. As to be expected these flows were far below the rolling 12-month average (€10.3 bn).

The inflows in the European ETF industry for June were driven by equity ETFs (+€2.6bn), followed by money market ETFs (+€0.3 bn), mixed-assets ETFs (+€0.03 bn), “other” ETFs (+€0.02 bn), and alternative UCITS ETFs (+€0.01 bn). On the other side of the table, commodities ETFs (-€0.7 bn) and bond ETFs (-€2.3 bn) were facing outflows.

This flow pattern drove the estimated overall net flows to negative €0.01 bn for the month. Given the general negative market environment, it was surprising that equity ETFs enjoyed inflows for the month.

Graph 2: Estimated Net Sales by Asset Type, June 2022 (Euro Millions)

Review of the European ETF Industry, June 2022

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 167 different peer groups. The highest assets under management at the end of June were held by funds classified as Equity U.S. (€263.5 bn), followed by Equity Global (€167.9 bn), Equity Europe (€60.5 bn), Equity Emerging Markets Global (€56.5 bn), and Equity Eurozone (€46.0 bn). These five peer groups accounted for 47.94% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 59.70%.

Overall, 20 of the 167 peer groups each accounted for more than 1% of assets under management. In total, these 20 peer groups accounted for €911.4 bn, or 73.50%, of the overall assets under management. In addition, it was noteworthy that the rankings of the largest peer groups saw some movement in single positions after the market turmoil caused by the COVID-19 crisis and the following recovery. As the positions of the peer groups 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, June 31, 2022 (Euro Millions)

Review of the European ETF Industry, June 2022

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 their constituents 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 31, 2022 (Euro Millions)

Source: Refinitiv Lipper

 

Fund Flows by Lipper Global Classifications

The net inflows of the 10 best-selling Lipper classifications accounted for €9.5 bn. As for the overall sales for June, it was not surprising that six equity peer groups (+€5.7 bn) were on the table of the 10 best-selling peer groups by estimated net flows. Given the overall fund flows trend in the European ETF industry it was surprising that Bond USD Government (+€2.6 bn) was the best-selling Lipper global classification for June. It was followed by Equity Global (+€2.3 bn) and Equity China (+€1.5 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, June 2022 (Euro Millions)

Review of the European ETF Industry, June 2022

Source: Refinitiv Lipper

On the other side of the table, the 10 peer groups with the highest estimated net outflows for June accounted for €7.3 bn in outflows.

 

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 22 of the 48 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€559.2 bn)—accounted for 45.10% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€171.0 bn)—and the number-three promoter—Xtrackers (€139.2 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, 2022 (Euro Millions)

Source: Refinitiv Lipper

The 10-top promoters accounted for 94.09% of the overall assets under management in the European ETF industry. This meant, in turn, the other 38 fund promoters registering at least one ETF for sale in Europe accounted for only 5.91% of the overall assets under management.

Fund Flows by Promoters

Since the European ETF market is highly concentrated, it was surprising that only four of the 10 largest promoters by assets under management were among the 10-top selling ETF promoters for June. Vanguard was the best-selling ETF promoter in Europe for June (+€1.3 bn), ahead of Amundi ETF (+€0.9 bn) and UBS ETF (+€0.6 bn).

Graph 7: Ten Best-Selling ETF Promoters, June 2022 (Euro Millions)

Review of the European ETF Industry, June 2022

Source: Refinitiv Lipper

The flows of the 10-top promoters accounted for estimated net inflows of €3.5 bn. As for the overall flow trend in June, it was clear that some of the 48 promoters (17) faced net outflows (-€3.6 bn in total) over the course of the month.

 

Assets Under Management by Funds

There were 3,319 instruments (primary funds and convenience share classes) listed as ETFs in the Lipper database at the end of June. Regarding the overall market pattern, it was not surprising assets under management at the ETF level were also highly concentrated. Only 290 of the 3,319 instruments held assets above €1.0 bn each. These products accounted for €810.2 bn, or 65.34%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €194.4 bn, or 15.68%, 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, 2022 (Euro Millions)

Source: Refinitiv Lipper

 

ETF Flows by Funds

A total of 1,211 of the 3,319 instruments analyzed in this report showed net inflows of more than €10,000 each for June, accounting for €28.4 bn. This meant the other 2,108 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 69 of the 1,211 ETFs posting net inflows enjoyed inflows of more than €100 m during June—for a total of €14.6 bn. The best-selling ETF for June was the iShares $ Corp Bond UCITS ETF USD (Dist), which enjoyed estimated net inflows of €0.8 bn. It was followed by Amundi S&P 500 UCITS ETF – EUR (C) (+€0.6 bn) and iShares Core S&P 500 UCITS ETF USD (Acc) (+€0.6 bn).

Graph 9: Ten Best-Selling ETFs, June 2022 (Euro Millions)

Review of the European ETF Industry, June 2022

Source: Refinitiv Lipper

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 levels. Given its size and the overall trend for net sales at the promoter level, it was not surprising that seven of the 10 best-selling funds for June were promoted by iShares. These iShares ETFs accounted for total estimated net inflows of €3.7 bn.

 

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

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