The European ETF industry enjoyed inflows over the course of December 2022. These inflows occurred in a volatile market environment. The market sentiment is driven by concerns about high inflation rates, increasing interest rates, the late effects from the market turmoil in UK government bonds, geopolitical tensions, and disrupted delivery chains caused by the still ongoing COVID-19 pandemic. The performance of the underlying markets led in conjunction with the estimated net inflows to decreasing assets under management (from €1,309.7 bn as of November 30, 2022, to €1,242.5 bn at the end of December). At a closer look, the decrease of €67.2 bn for December was driven by the performance of the underlying markets (-€72.7 bn), while estimated net inflows contributed (+€5.5 bn) to the assets under management.
As for the overall structure of the European ETF industry, it was not surprising equity funds (€884.2 bn) held the majority of assets, followed by bond funds (€304.6 bn), commodities products (€32.3 bn), money market products (€12.5 bn), alternative UCITS products (€5.7 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, December 31, 2022
Source: Refinitiv Lipper
Fund Flows by Asset Type
The European ETF industry enjoyed estimated net inflows (+€5.5 bn). These flows were below the rolling 12-month average (€6.7 bn).
The inflows in the European ETF industry for December were driven by equity ETFs (+€4.0bn), followed by bond ETFs (+€2.6 bn), money market ETFs (+€0.1 bn), and ”other” ETFs (+€0.01 bn). On the other side of the table, commodities ETFs (-€0.8 bn) faced the highest outflows for December 2022, bettered by alternative UCITS ETFs (-€0.4 bn) and mixed-assets ETFs (-€0.02 bn).
This flow pattern drove the estimated overall net flows to positive €5.5 bn for the month and positive €80.2 bn for the year 2022.
Graph 2: Estimated Net Sales by Asset Type, December 2022 (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 165 different peer groups. The highest assets under management at the end of December were held by funds classified as Equity U.S. (€262.6 bn), followed by Equity Global (€179.0 bn), Equity Europe (€61.9 bn), Equity Emerging Markets Global (€56.9 bn), and Equity Eurozone (€44.6 bn). These five peer groups accounted for 48.70% of the overall assets under management in the European ETF segment, while the 10-top classifications by assets under management accounted for 60.31%.
Overall, 21 of the 165 peer groups each accounted for more than 1% of assets under management. In total, these 21 peer groups accounted for €922.3 bn, or 74.22%, 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, December 31, 2022 (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 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, December 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 €7.7 bn. In line with the overall sales trend for December, it was not surprising that equity peer groups (+€4.8 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 flows trend in the European ETF industry it was not surprising that Equity Global (+€2.7 bn) was the best-selling Lipper global classification for December. It was followed by Equity Emerging Markets Global (+€1.3 bn) and Bond USD Government Short Term (+€0.7 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, December 2022 (Euro Millions)
Source: Refinitiv Lipper
On the other side of the table, the 10 peer groups with the highest estimated net outflows for December accounted for €4.4 bn in outflows.
With regard to the Lipper Global Classifications with the highest estimated outflows for December 2022, it was surprising to see that Equity US (-€0.7 bn) was the classification with the highest outflows for the month. The category was bettered by Commodity Blended (-€0.6 bn) and Bond EMU Government (-€0.6 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 22 of the 47 ETF promoters in Europe holding assets at or above €1.0 bn. The largest ETF promoter in Europe—iShares (€572.9 bn)—accounted for 46.11% of the overall assets under management, far ahead of the number-two promoter—Amundi ETF (€166.3 bn)—and the number-three promoter—Xtrackers (€122.7 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, December 31, 2022 (Euro Millions)
Source: Refinitiv Lipper
The 10-top promoters accounted for 93.73% 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 6.27% of the overall assets under management.
Fund Flows by Promoters
Since the European ETF market is highly concentrated, it was surprising that only six 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 (+€3.2 bn), ahead of Vanguard (+€1.3 bn) and JPMorgan (+€0.4 bn).
Graph 7: Ten Best-Selling ETF Promoters, December 2022 (Euro Millions)
Source: Refinitiv Lipper
The flows of the 10-top promoters accounted for estimated net inflows of €6.9 bn. As for the overall flow trend in December, it was clear that some of the 47 promoters (18) faced net outflows (-€1.8 bn in total) over the course of the month.
Assets Under Management by Funds
There were 3,484 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 282 of the 3,484 instruments held assets above €1.0 bn each. These products accounted for €794.0 bn, or 63.90%, of the overall assets in the European ETF industry. The 10 largest ETFs in Europe accounted for €189.4 bn, or 15.25%, 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, December 31, 2022 (Euro Millions)
Source: Refinitiv Lipper
ETF Flows by Funds
A total of 1,224 of the 3,484 instruments analyzed in this report showed net inflows of more than €10,000 each for December, accounting for €29.7 bn. This meant the other 2,260 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 76 of the 1,224 ETFs posting net inflows enjoyed inflows of more than €100 m during December—for a total of €16.0 bn. The best-selling ETF for December was the iShares Core MSCI World UCITS ETF USD (Acc), which enjoyed estimated net inflows of €1.0 bn. It was followed by iShares $ Treasury Bond 0-1yr UCITS ETF USD A (+€0.6 bn) and iShares $ Treasury Bd 1-3yr UCITS ETF USD Acc (+€0.6 bn).
Graph 9: Ten Best-Selling ETFs, December 2022 (Euro Millions)
Source: Refinitiv 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. 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 December were promoted by iShares. These iShares ETFs accounted for total estimated net inflows of €3.7 bn.
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